1) Benefit of exemption would not be available for repayment of loan.
2) You should sell the property on or after May 19.
3) You need to directly invest in under construction property.
Capital gains - property
Hi, I bought a flat in the year 2010 for 32 Lakhs (Property 1), I recently booked an under construction property ( March 2018) let us call this as property 2, the construction will be completed in May 2022. I would like to sell Property 1 and use proceeds of the same in order to prepay partial amount of my loan taken for property 2. Q1) Can this be done without paying Capital gains tax ( if applicable post Indexation) exercise. If YES then Q 2) What would be the last date/ Month by which I can sell Property 1. Q 3) What would be the best procedure in order to ensure least inconvenience. Regards, Nikhil
Asked 7 years ago in Capital Gains Tax
Hi
Capital gain exemption can be claimed if the new property is purchased within before 1 year or after 2 years (3 years for construction) of sale of old property.
So, ideally, you can sell old property by March 19.
But, looking at the 3 year time limit, the construction of the new property should be completed within 3 years of transfer of old property. If the property is sold in March 19, construction of new property should be completed by March 2022.
Since construction of your property 2 shall be completed post the time limit, exemption from capital gain shall not be available.
Dear Nikhil,
1. No, this cannot be done without paying capital gain taxes. In order to save capital gain, you need to invest the money in another property which is getting completed within 3 years from the date of sale and you cannot invest in the property before one year from the date of sale.
2 and 3. These question becomes irrelevant.
Other option to save tax is invest the capital gain amount in eligible bonds.
Please feel free to call/ revert in case you need more clarity.
Thanks and regards
Abhishek Dugar
CA CS B.Com
Hi Nikhil,
Prepayment of loan will not give you any relief from capital gains tax. You need to invest the capital gains in a residential property within 2 years (within 3 years in case of an under construction property) from the date of sale or within 1 year before the date of sale.
You can sell your property 1 max by May 2019 and use the capital gains to make payments for Property 2. However ensure that the construction is completed eothin the stipulated period of 3 years.
Hope that helps.
Regards,
Nikhil.
You can use the sale proceeds for repayment but exemption will not be available for the same.
In my opinion,you have to invest before one year from sale or within 2 yrs(3 yrs in case of underco nstruction property) from date of transfer of property to take capital gain exemption.
Further you can invest in bonds also to save capital gain tax.
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