Bought an Agriculture plot 6 years back. This Month, I am selling it with profit of 18 Lakh (after indexation), but the status of is REsidential now. Now I Had booked a FLAT in year 2014 but will take Possession after selling the plot. 1. Will the income tax laws treat it as Income on Agriculture land or Residential plot ? 2. Can I use the profit money of 18Lakh to pay Outstanding to Builder, Registry and Advance Maintenance for the flat , to avoid paying LTCG tax ?
Hi
1. Residential property. It will be taxable capital gains
2. No, exemption shall not be available. The relevant date for date of acquisition is date of allotment which would be in 2014 in your case and hence conditions for section 54F exemption are not fulfilled.
Hi,
Hope you are doing well !
1. It is a residential property. You have to pay capital gain tax,if incurred.
2.No, as you have not satisfied the conditions of Section 54F. For claim exemption u/s 54F, the purchase of new residential house should be within one year before or 2 years after.
Thanks & Regards,
Payal Chhajed
Hi,
Please find below the complete section for your reference:
Section 54F: Capital Gain Exemption of Any Property:
The section 54F gives you exemption from the capital gains even if your sold property is not a residential property. But, the new property must be the residential property. This rule promotes the purchase of a residential house.
The Exemption under Section 54F
The exemption can be for the full amount of capital gains.
The capital gain amount can be invested in the capital gains account till it is utilized for purchase or construction of a house. The deposit in capital gain account should be before filing income tax return.
Conditions of Section 54F
1.The exemption is allowed only if the new property is a residential house.
2.The exemption is allowed, If you did not have any residential property before the new house.
2.The purchase of new residential house should be within one year before or 2 years after.
4The construction of residential house should be completed within 3 years.
5.The residential house should be in India.
6.The assessee should sell or transfer the new house within three years of its purchase or construction. If it happens, the capital gains exemption would be withdrawn similar to the section 54.
Calculation of Exemption Under Section 54F
The total capital gain would be exempted if 100% sale proceeds is invested in the residential property.
If full capital gains is not invested, exemption shall be allowed proportionately. The exempted amount would be calculated according to the following formula.
(Capital Gain X Amount Invested)/ Net Sale Consideration
The exemption can’t be more than the capital gain.
Thanks & Regards,
Payal Chhajed
But the flat hasnt been completely bought , some payment to Builder needs to be given and Registry/Stamp duty still needs to be paid and then possession to be taken next month. Does the above fact not make the eligibility for a new house ?
No, this would not clear the eligibility criteria.
As I mentioned, the relevant date is date of allotment. If date of allotment is within 1 year before limit, then only exemption could be granted.
Since it's a land, you need to invest the entire sales consideration in a new residential house property or 54EC bonds in order to claim exemption from capital gains. Or else, capital gain shall be chargeable to tax @ 20.8%.
Sorry, but it won't help you.
The date of allotment letter is considered for holding property.
Thanks & Regards,
Payal Chhajed
Thx. After selling my residential plot for say 30 L, My Capital Gain (after applying indexation) is 12 L. Can I buy a plot for 12L to be fully exempt from tax ? Will Section 54 apply or Section 54F in my case ? Ref to IT website, it talks about investing capital GAIN amount (under Section 54) https://www.incometaxindia.gov.in/tutorials/16.%20exemption%20under%2054.pdf
Hi,
1. It will be treated as a Residential property and you will be liable to capital gains tax.
2. No exemption shall be available. Conditions of Sec 54F are not fulfilled
Regards
Nikhil
Unfortunately, No. The time frame as per Sec 54F have not been complied with.
You will need to invest the entire sales proceeds in a residential house property or specified bonds under section 54EC in order to claim exemption from capital gains.
Since it is a sale of land, section 54F shall apply and thereby entire 30lacs needs to be invested in a residential house property ( not just a residential land).
However, if you are investing in 54EC bonds, you need to invest 12 lacs only. Such bonds shall be redeemable after 5 years. Investment has to be done within 6 months of transfer.
Hi,
In your case, section 54F shll apply.
The new property must be the residential property. The total capital gain would be exempted if 100% sale proceeds is invested in the residential property i.e Rs 30 lakh.
Thanks & Regards,
Payal Chhajed
Further, if you just want to invest Rs. 12 lakh.
You need to invest in 54EC bond.
The entire capital gain realized is invested within 6 months of the date of transfer in eligible bond.
Such investment is held for 5 years.
Thanks & Regards,
Payal Chhajed
Dear Sir,
1) In the eyes of the income tax laws, it will be treated as residential plot and will be taxable on its transfer.
2) You can avail the benefit of exemption of LTCG either under section 54EC or 54F and not under section 54 as the property sold is plot and not house property.
3) What is the cost of new asset and how much payment you made before selling the current asset and post selling?
Thanks
Hi,
1. It will be a sale of residential plot and you will have to pay capital gain tax. However, you can take benefit of section 54F and invest the sale consideration in new house property to save taxes.
2. No, you can use the amount to make the payment of existing house. The house will be considered to be purchased in 2014.
Section 54F is applicable in your case because you have sold a plot and not a residential property. Accordingly, you will have to invest entire sales consideration and not just profit element.
it seems your query is already been answered. In case of further clarification required,please follow up.
