• LTCG Tax exception for purchase of constructed house

I have sold my site in Apr 2016 and had a LTCG of 25 Lakh deposited in Capital Gain a/c in SBI. Till today I could not invest in any property. Now after 2 years and 8 months
1. Can I purchase a constructed house for 25 Lakh and get waiver on LTCG Tax?
2. If I have to pay Tax, please calcute the tax and inform
3. Can I purchase a site for 22 Lakh and an Asbestor sheet house for 1 Lakh for purpose of LTCG Tax waiver?
Asked 6 days ago in Capital Gains Tax from Bangalore, Karnataka

First of all you can buy constructed house if you had invested/deposited amount in capital gain bank account which is for construction of house.

Secondly if you get a constructed house directly which means you are directly purchasing the house in this case 2 year limit will be applicable which has expired.

What is asbestor house sheet?

I am assuming that you are saying that you would purchase a land and get a house constructed for 1 lakh to save tax, I guess you can do that and save tax that's the only option you have now if you had sold a land then you need to invest entire sale consideration and not only capital gain amount to save capital gain tax.

If you can't claim any exemption then you need to pay atleast 5 lakh tax i.e. 25 lakh * 20% + education cess.

 

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
559 Answers
4 Consultations

5.0 on 5.0

To save tax, purchase under- constructed property.

Vivek Kumar Arora
CA, Delhi
1713 Answers
51 Consultations

5.0 on 5.0

No I don't think so since it's taxable in the year in which you withdraw the amount.

There can be interest of not paying any advance tax which will be 1% per month u/s 234B and 234C.

 

Naman Maloo
CA, Jaipur
559 Answers
4 Consultations

5.0 on 5.0

Hi,

Hope you are doing well !!

Now, you can purchase under construction property for tax exemption.

However, the new residential house property must be constructed within 3 years of sale of the property/asset.

2. The capital gain tax amount will be Rs. 5 lakh plus applicable surchage & cess. (20% on Rs. 25,00,000).

3. Yes, you can do that.

 

Thanks & Regards,

Payal Chhajed

Payal Chhajed
CA, Mumbai
1093 Answers
8 Consultations

4.8 on 5.0

 

Lastly, if the amount not utilized remain in the Capital Gain Deposit Account Scheme even after a specified period of 2/3 years. In short, either you are not able to finalize the property or provisioned extra amount for property purchase. The 100% of the amount not utilized will be taxed as long term capital for the financial year in which the specific period gets over.

Penalty is in form of interest on tax that you owe till you pay your tax. The penalty is charges under sections 234 B & 234 C.

Payal Chhajed
CA, Mumbai
1093 Answers
8 Consultations

4.8 on 5.0

Hi

 

1. No, the time limit of 2 years has lapsed.

2. It would be 5 lacs.

3. The time limit for construction of a new house property is 3 years. By general terms, it is to be understood that the property so constructed should be a residential house.

 

Lakshita Bhandari
CA, Mumbai
2235 Answers
80 Consultations

5.0 on 5.0

Since your time limit of 3 years shall expire in April 19, such capital gain become taxable in FY 19-20. 

Cess would be 4% on 5 lacs.

No interest applicable if you pay the advance tax by June 2019.

Lakshita Bhandari
CA, Mumbai
2235 Answers
80 Consultations

5.0 on 5.0

4. There doesn't seem any other way to save taxes. Time limits for all the other sections have expired.

Lakshita Bhandari
CA, Mumbai
2235 Answers
80 Consultations

5.0 on 5.0

Hi,

1.No it is beyond exemption time period.

2. 5 lakh i.e. (20% of 25 lakh)

3. Yes provided construction of residential property shold be completed within 3 years.

Karishma Chhajer
CA, Jodhpur
619 Answers
3 Consultations

5.0 on 5.0

No other way to save taxes.

Karishma Chhajer
CA, Jodhpur
619 Answers
3 Consultations

5.0 on 5.0

If you pay the advaces taxes timely then no interest.

Karishma Chhajer
CA, Jodhpur
619 Answers
3 Consultations

5.0 on 5.0

Unfortunately, the time period of all other tax exemptions have expired.

 

However, you should pay the advance tax on time to avoid any interest liability.

 

Payal Chhajed
CA, Mumbai
1093 Answers
8 Consultations

4.8 on 5.0

Hi,

 

1 . No. However You can invest in an under construction property and ensure that you get possession before completion of 3 year period.

2. 5 lakh + cess

3. Ideally the property bought should be a residential property. So it may not be allowed.

 

Nikhil Khanna
CA, Mumbai
1424 Answers
19 Consultations

4.8 on 5.0

No other way to save taxes as the time limit has crossed 

Nikhil Khanna
CA, Mumbai
1424 Answers
19 Consultations

4.8 on 5.0

Your time limit to buy was 2 years from the date of sale which has lapsed.  The option now available is to invest in construction of the house.  There are host of case laws which provides that if the construction is not completed within a specific period, benefit of exemption should not be denied.  Hence, you may still take an under construction property which gives delivery by April 2019 atleast on papers.  If there is subsequent delay in delivery your exemption should not be denied.

Well whether just putting an asbestos sheet mean construction of house, there are no specific provision or case laws.  IN my view, this would not be acceptable.  Even thinking logically, would the site be registered as house, how are any stamp duty paid ?  While analyzing the taxability, the Income-tax officer would see the agreement of purchase, cost of construction and other documentary evidence etc and hence could lead to litigation. IF you fail to do anything, then this capital gains should be offered to tax as income for financial year 2019-2020 since 3 years gets over in April 2019.   You should considered paying advance tax on this capital gains within the due dates as under to avoid interest exposure :

Due Date

Advance Tax Payable

On or before 15th June

15% of advance tax

On or before 15th September

45% of advance tax

On or before 15th December

75% of advance tax

On or before 15th March

100% of advance tax

 

With indexation benefit, this will be taxable at 20% + applicable surcharge, if any and cess.  The surcharge and cess would be as applicable in that relevant financial year.

Jasmina Jain Shah
CA, Greater Mumbai
101 Answers
1 Consultation

5.0 on 5.0

It is ok. 

 

For more clarification, please call.

Vivek Kumar Arora
CA, Delhi
1713 Answers
51 Consultations

5.0 on 5.0

Hi,

 

Hope you are doing well !!

 

Yes, you are eligible to get LTCG Tax waiver provided construction must be completed within 3 years from the date of transfer.

 

Thanks & Regards,

Payal Chhajed

 

 

Payal Chhajed
CA, Mumbai
1093 Answers
8 Consultations

4.8 on 5.0

Yes, it is ok.

Karishma Chhajer
CA, Jodhpur
619 Answers
3 Consultations

5.0 on 5.0

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