Reinvestment of capital gains

Hi,

Please clarify is it residential plot or residential house?

Hi

Firstly, investment in residential plot is not eligible for exemption. You need to invest in a residential house property. You may opt to construct a house on the residential land bought.

Since a residential plot was sold, you need to invest the entire sales proceeds. This could be done in a residential house property and claim exemption under section 54 F or in eligible bonds and claim Exemption under section 54 EC. Part Investments can also be done.

You have mentioned that 25 lakh is your capital gain amount and not sale amount.

If 25 lakh is your capital gain amount and if you have invested 8 lakh in bonds then it's fully exempt u/s 54EC and rest 17 lakh which you have invested in buying another plot will be exempt if you construct a residential house over same with in 3 years otherwise you will have to pay tax on same @20%.

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

Thank you

Hi,

- Exemption is available for investment in residential house and not plot. If you desire to do construction then you it will be available but it should be completed within 3 three years.

- Investment in capital bonds is eligible for exemption.

Thanks

Capital gain tax exemption is available only if you reinvest in a residential house property income and not in a plot. However You can claim exemption u/s 54 EC by investing in specified capital gain bonds.

Regards,

Nikhil.

Hi,

Exemption is available only if you reinvest in a residential house property and not in a plot.

If you want to claim exemption then you will have to construct a house over same provided construction is completed within 3 years.

However, investment done in capital gain bonds is fully exempt u/s 54EC.

I assume that the plot sold by you was held for more than 3 years and hence is a long term capital asset for you and the gains are long term capital gains. Kindly note that you can claim indexation benefit while determing cost of the asset for calculating gains.

There is an exemption in case you invest the gains in purchase or construction of residential house. Merely buying a plot with no intention to convert into residential house should not provide exemption. You can claim exemption by investment into tax saving bonds within the stipulated period. In case you are constructing house and having bonds then entire gains are exempt, else only to the extent of buying tax saving bonds.

To save tax you have to buy new residential property within 2 years of sale.

And if u wish to invest some money in capital gain bonds then you need to invest in it before due date of filling of return, If due to any reason you are unable to invest before filling of return than keep that amount in capital gains account in a bank till it is invested in bonds.