Capital gain tax benefit post purchase

Dear Sir,

Hope you are doing well !!

Yes, you can take the benefit of capital gain exemption provided the new residential house property should be purchased either one year before the date of transfer or two years after the date of sale or transfer. In case of construction of new house the individual is given an extended time period to construct house i.e within three years of the date of transfer or sale.

If you do not get a chance to invest in a profitable property immediately and still want to save your long-term gains from being taxed, you can invest your capital gains in CGDAS by approaching any public sector bank. The timeframe for the purchase or construction of the property remains unchanged in this case as well. But you can utilise this account momentarily so that you save your gains from being taxed and have more time to finalise a property for reinvestment.

It is required to deposit such unutilised capital gain in the capital gains account before furnishing return of income but not beyond due date for furnishing return of income.

The due date of filing Income Tax return is 30th November for the Financial Year 2019-20.

Hello,

As per the time limit for exemption u/s. 54 for investment in residential property, you can purchase the residential property now but to be able to claim the exemption from LTCG you would be required to sell the old property within one year from the date of purchasing the new property.

I hope this answer satisfies your requirements.

Regards,

CA Hunny Badlani

Yes, you can sell your old house till Feb 2021 and make the full payment to the seller for your new house. You would be eligible for the capital gain exemption.

Hi

Under Section 54 the IncomeTax Act, an individual or HUF selling a residential property can avail tax exemptions from Capital Gains if the capital gains are invested in purchase or construction of residential property. Taxpayers such as partnership firms, LLP’s, companies or any other association or body cannot claim tax exemption under section 54.

The conditions that need to be satisfied to avail the benefit of the said section are as follows:

• Asset must be classified as a long-term capital asset.
• The asset sold is a Residential House. Income from such a house should be chargeable as Income from House Property
• The seller should purchase a residential house either 1 year before the date of sale/transfer or 2 years after the date of sale/transfer. In case the seller is constructing a house, the seller has an extended time, ie. the seller will have to construct the residential house within 3 years from the date of sale/transfer. In case of compulsory acquisition, the period of acquisition or construction will be determined from the date of receipt of compensation (whether original or additional compensation)
• The new residential house should be in India. The seller cannot buy or purchase a residential house abroad and claim the exemption.

The above conditions are cumulative. Hence, even if one condition is not fulfilled, then the seller cannot avail the benefit of the exemption under Section 54.
With effect from Assessment Year 2020-21 corresponding to FY 2019-20, a capital gain exemption is available for purchase of two residential houses in India. However, the exemption is subject to the capital gain not exceeding Rs 2 crore. Also, the exemption is available only once in the lifetime of the seller.

So yes can avail exemption 

You can acquire new house within 2 years from the sale of the old house. But the fund should be deposited in Capital gain Account Scheme if the house is not acquired within 6 months from the date of sale.

Another house can also be purchased within 1 year before the date of sale. This new house will be eligible for capital gain.

When are you going to sell your house?

You can purchase new house before 1 year of sale or after 2 year of sale or construct within 3 years of sale.

Thus I think you will have enough time.

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

Thank you.

You can take the benefit of the capital gain tax by purchasing the new house if you sell your old property within one year of purchase of new house.