• Reinvesting capital gain and tax declaration

Hi,

I sold a house in May 2018 and I'm going to buy an apartment for reinvesting my capital gains.
The apartment will be registered to my name only in Jan 2020, the agreement to purchase will be carried out in 1-2 weeks from now. I have the below two doubts,

1. Can i pay the amount during the agreement directly to the builder, or would i need to first deposit the amount in Capital Gain Savings account and then transfer it to the builder from there?

2. Also, if I can pay the builder directly, then can I declare this while filing this year's income tax. That I have received a certain amount from capital gain and that I have re-invested it for buying a property that will be registered in Jan 2020?

Thanks in advance for all your help.
Asked 2 years ago in Capital Gains Tax

Hi,

1. Yes, you can pay the amount directly to the builder if you are paying the amount before July 2019.

2. Yes, you will have to declare this in your income tax return to avail benefit of deduction from capital gain.

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

Hi,

Hope you are doing well !

1.Yes, you can pay directly to the builder provided you are paying the amount before July,2019.

2.Yes, you will.

Payal Chhajed
CA, Mumbai
4896 Answers
91 Consultations

5.0 on 5.0

Hi,

1.You could directly pay to the builder.

2. Yes you need to declare so that you can take exemption from capital gains tax.

Regards,

Nikhil.

Nikhil Khanna
CA, Mumbai
1428 Answers
19 Consultations

4.8 on 5.0

No you can directly transfer the amount to builder you need to invest in capital gain account only if you are not able to use the capital gain amount before filing return of income.

Yes you can claim exemption u/s 54. However I would not suggest to make payment to builder before the building is complete as it will attract GST.

However it's your choice if you transfer the entire sale consideration of earlier flat before March to the builder then there's no need for investing anything in capital gain account and you can claim exemption u/s 54 of the act.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Naman Maloo
CA, Jaipur
3668 Answers
40 Consultations

5.0 on 5.0

Hi

You may pay the amount directly to the builder.

However, if the amount paid to the builder till due date of return filing I.e. 31 July 2019 is less than the capital gain amount, you need to deposit the remaining amount in capital gain deposit account.

Claim the capital gain exemption on the basis of such amount paid to the builder in the ITR.

Lakshita Bhandari
CA, Mumbai
5245 Answers
351 Consultations

5.0 on 5.0

If you going to get your house constructed within 3 years then you can obviously claim exemption u/s 54 and if you are going to use the amount of sale consideration and invest it in new property before filing return of income then the receipt from builder is enough proof that you have utilised such amount in buying apartment and you just need to mention the exemption section in your return of income and nothing more.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Naman Maloo
CA, Jaipur
3668 Answers
40 Consultations

5.0 on 5.0

Hi,

1. Yes, it is fine.

2. There is specific column in ITR regarding Deduction under section 54/54B/54EC/54EE/54F/54GB.

Thanks & Regards,

Payal Chhajed

Payal Chhajed
CA, Mumbai
4896 Answers
91 Consultations

5.0 on 5.0

Hi,

1.Yes.

2. Yes.

Karishma Chhajer
CA, Jodhpur
2272 Answers
15 Consultations

5.0 on 5.0

Hi,

1. Yes, it should be fine.

2. You can claim exemption u/s 54.

Regards,

Nikhil.

Nikhil Khanna
CA, Mumbai
1428 Answers
19 Consultations

4.8 on 5.0

Hi,

- When you will get possession of the house?. Agreement to purchase should show amount of Rs. 70 lacs and condition of registration by Jan 2020. Basis on this you will get exemption.

- You need to show the entire transaction in Schedule LTCG and exemption u/s 54.

- If you will make part payment then you need to deposit the remaining amount in CGAS before filing of return in July 2019.

Thanks

Vivek Kumar Arora
CA, Delhi
3800 Answers
242 Consultations

5.0 on 5.0

Hi,

1. No, you should not make the agreement with lesser value. Agreement should be made with actual values. Otherwise, you will get exemption of only 25 lacs and you will also have to incure more capital gain when you sale this house in future.

2. You will have to declare the details of capital gain exemption in tab "CG" of ITR.

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

Hi

1. Yes, the Exemption shall be available.

2. You need to mention the investment made under section 54 in LTCG schedule. Also, proper capital gain calculation shall be shown.

You need to get the property registered at the actual cost only. I didn't get your point of sale agreement of 25 lacs.

Lakshita Bhandari
CA, Mumbai
5245 Answers
351 Consultations

5.0 on 5.0

Hi

Yes you can pay directly to builder,You have to declare it in income tax return ,under Capital gain section.Exemption under sec 54.

It is advisable to get property registered at full value.

Hope it helps.

Swati Agrawal
CA, Mumbai
1146 Answers
7 Consultations

5.0 on 5.0

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