• Capital gain tax on sale of residential house

Q 1) I have purchased a residential house in July 2018, which is the first in my life, and after that I demolished the house as it was not in habitable state. After taking due permission I constructed a new residential building and completed the same in Dec 2020. Now I have got a Buyer and if I want to sell it in the month of April 2021 then how do I calculate Capital Gain Tax , assuming there is overall gain as a whole on it and how will it be termed( Long term Gain or Short term gain)
Q 2) Whether total sale proceeds is to be kept in Capital Gain A/C or the amount gained only to be kept in Capital Gain A/C and what is the time period in which this required amount needs to be transferred from SB A/C to Capital Gain A/C?
Q 3) Can I save this Capital Gain Tax if I purchase a new residential property within 1 year from the date of selling of this property and what are the conditions for using sale proceeds to be spent in new residential property?
Q 4) If I want to buy a new residential property( within 1 yr of selling my 1st property) and part of Capital Gain amount is used to finance it and balance by taking home loan then will there be Capital Gain Tax on balance Capital Gain amount?
Asked 25 days ago in Capital Gains Tax

1) It would be a long term capital gain as the holding period of the property before sale is more than 2 years.

2) Only capital gain amount needs to deposited in capital gain scheme deposit account before the due date of filing of ITR for F.Y. 2021-22.

3) For purchase of property after the sale, time period is 2 years and for construction it is 3 years from the date of sale. Yes you will save tax if amount is invested within 1 year from the date of sale. 

4) In your case, capital gain amount is compared with cost of new residential property. If capital gain is more than cost of new house then difference is chargeable to tax otherwise it is fully exempt.

5) You should accept sale proceeds in your savings account.

6) Before filing of ITR either invest in property or deposit in capital gain deposit account to avail the exemption.

7) For cost of improvement (i.e. construction), indexation will be available from F.Y. 2020-21.

 

For detailed discussion, we may discuss it over a call.

Vivek Kumar Arora
CA, Delhi
4079 Answers
346 Consultations

5.0 on 5.0

Dear Sir,

 

Hope you are doing well !!

 

1. It would be treated as long term capital gain.

Amount of capital gain would depend upon sale price, sale date, purchase price and purchase date by you. Please share the details with us for exact capital gain calculation.

 

2.Please note that in order to claim exemption, you need to invest the capital gain amount if a house property is sold. However, in case of sale of a land, entire sales consideration needs to be invested.

 

So, you need to deposit only capital gain amount in CGAS on or before due date of filing return for FY 2021-22.

 

3.You can avoid tax on capital gains from the sale of a house property if you reinvest the money to buy another property. You can claim tax exemptions under this section if you buy the new property one year before the sale or two years after the sale. In case it is under construction, the new property should be ready within three years of the old property’s sale.

 

4.In case entire capital gains are not invested – the amount not invested is charged to tax as long-term capital gains.

 

5.No, there is nothing wrong in it.

In fact, you should accept the same in saving account only.

 

6.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.

 

Normally, the due date of filing Income Tax return is July 31 for the previous Financial Year. Under extraordinary circumstances, it can be extended by the Finance Ministry.

 

We may assist you in capital gain calculation & entire procedure.

 

It is advisable to take a phone consultation for detailed discussion.

 

 

Payal Chhajed
CA, Mumbai
5084 Answers
157 Consultations

5.0 on 5.0

It will be long term gain.

Are you going to invest this amount in new house?

Yes you can save by buying new house but then you need to keep it in CGAS before filing return of income.

 

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement. You can even book phone consultation for further personal assistance.

Thank you.

Naman Maloo
CA, Jaipur
3798 Answers
45 Consultations

5.0 on 5.0

1)Capital gain will be long term capital gain as it will be sold after 24 months from acquisition.

2) Capital Gain amount is to be deposited in Capital gain Account scheme within 6 months from date of sale.

3) Entire Capital gain amount is to be invested within 1 year from date of sale.

4)Yes there will be tax on balance capital gain amount.

 

You can take it in savings account but you should transfer it to CGAS within 6 months from date of sale.

No, you cannot park the money in it for 1 year.

Ruchi Goel Anchal
CA, Gurgaon
447 Answers
5 Consultations

5.0 on 5.0

Hi

 

  1. This would be long term capital gain.
  2. You need to deposit capital gain amount in CGDS account before due date of return filing or actual date of return filing, whichever is earlier
  3. Yes, you can claim capital gain exemption if investment in new property is done within 2 years of sale/ construction is done within 3 years of sale
  4. No. The criteria of exemption is investment to be done. The investment need not be from the funds of sale of earlier property.

Lakshita Bhandari
CA, Mumbai
5475 Answers
551 Consultations

5.0 on 5.0

Yes, you can take in your saving account first. If investment is not done upto due date for return filing or actual date of return filing, whichever is earlier, you need to open CGDS account and transfer funds in that account.

Lakshita Bhandari
CA, Mumbai
5475 Answers
551 Consultations

5.0 on 5.0

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