• Capital gains on residential house sale

 My mother is having a residential property which was bought in 1988 at a consideration value of 300000 rupees( 3 lakhs), Now the government valuation of that residential building is 2.56 crores, What is the capital gain tax she should pay if she sells the property in this year ,she is also having some other residential properties on her name. can she buy another residential house with money from sale proceeds so that she can avoid capital gains tax.,(note--she is having other properties on her name) .If yes, does she have to deposit the entire sale proceeds in CAPITAL GAINS ACCOUNT SCHEME 1988 or only the capital gains she receive should be deposited. Can she first deposit the sale proceeds into savings bank account and open capital gains accounts scheme later or does she has to open capital gains scheme account and deposit in it first?. She also spend money on renovation and construction of first floor and second floor in 1999 and 2005 for which she has spend 10lakhs and 20 lakhs respectively for which she didn't keep the bills and receipts. If she decides not to buy the new property, please tell me the tax liability if she sells the property in this year itself with taking 2021 indexation into consideration. Can she claim exemption up to 50 lakhs capital gain if she utilizes sec 54ec.Please help us in this matter.
Asked 18 days ago in Capital Gains Tax



The sale of such residential property by your mother would be liable for LTCG Long Term Capital Gain. 

To calculate the liable LTCG, you need the cost of acquisition COA. The cost of acquisition for property purchased before 1st April 2001 would be the FMV Fair Market Value as on 1st April 2001. This COA would then be indexed using the cost inflation index up to the year of sale. The net figure of the Sale Proceed and indexed cost of acquisition would be the LTCG taxable at 20%.

Regarding exemption, the available exemption sections are Sec. 54 and Sec 54EC.

Sec. 54 exemption would be available on the investment of the capital gain amount in another residential property within the specified period. This section doesn't have any condition of limit on the number of houses already owned, this condition is there in Sec. 54F.

Sec. 54EC exemption would be available on the investment of capital gain amount in specified NHAI REC Bonds within the period of six months from the sale. 

I hope this answer satisfies your requirements. For a detailed resolution of your query, you can contact us directly at badlaniassociates at Gmail or take a phone consultation.



CA Hunny Badlani

Badlani & Associates

Hunny Badlani
CA, Madhya Pradesh
2584 Answers
12 Consultations

5.0 on 5.0

Dear Sir,


Hope you are doing well !!


As such date of acquisition falls prior to 1 April 2001, she has a choice to consider the Fair Market Value (FMV) of the property as on 1 April 2001 as her cost. 


So, firstly she needs to get the valuation report of property as on 01.04.2001.


Government-approved valuers follow a standard process for the valuation and provide a detailed report.


Assumptions of any type for consideration of value shall not be entertained by the income tax department. In case of any enquiry, the department will consider the value stated in the valuation report from a registered valuer,"



Exemption from long term capital gains


She can claim an exemption from LTCG, under section 54 of the income-tax Act if the LTCG is reinvested in a new residential property located in India within the specified time frames. Where the new property is purchased, the gain is required to be reinvested either within 1 year prior to sale date or 2 years after the sale date. Where the new property is constructed, the time period prescribed for the reinvestment is within 3 years from the date of sale of the original asset.


Alternatively and/or additionally, she can invest the capital gains of up to Rs 50 lakhs in bonds of NHAI or REC, within six months of its accrual and get the exemption u/s 54EC.


We can help you in getting the FMV of the property as on 1.4.2001.


We may assist you in entire procedure.


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


Payal Chhajed
CA, Mumbai
5132 Answers
191 Consultations

5.0 on 5.0


1. The property was purchased before 01.04.2001 therefore you have the option to consider FMV of the property as on 01.04.2001. In such case, COA means actual COA or FMV as on 01.04.2001 whichever is higher. The FMV of the property as on 01.04.2001 shall not exceed the stamp duty value of the property as on 01.04.2001.


2. Value as on 01.04.2001 would absorb all cost and improvements done before 01.04.2001. Without invoices, it would be difficult to claim cost of improvements done in 2015.


3. Sale consideration of the property should not be less than the stamp duty value. Where the Stamp duty value does not exceeds 110% of the amount of consideration received, the consideration so received be deemed to be the full value of the consideration.


4. For the purposes of exemption, she can either purchase or construct new residential property u/s 54 OR invest in specified bonds u/s 54EC irrespective of multiple residential properties in her name . The amount of investment is capital gain amount. Under section 54EC, she can invest upto Rs. 50 lacs within six months from the date of transfer of the property.


5. Where the amount of capital gain is not utilised for purchase or construction of new residential property before the due date of furnishing the ITR, it shall be deposited on or before the due date of furnishing ITR in capital gain deposit account. She has to deposit capital gain amount. In case of 54EC there is no benefit of capital gain deposit account.


6. She should first take the sale consideration amount in her saving bank account and then invests or deposits out of such proceeds. 


7. Considering COA Rs.3 lacs, capital gain tax liability would be Rs.64 lacs approx.


For more detailed discussion, you may opt for phone consultation.


Vivek Kumar Arora
CA, Delhi
4243 Answers
408 Consultations

5.0 on 5.0



Section 54 and 54EC exemptions would be available.


Only capital gain amount needs to be deposited in the CGDS account.


Yes, it can be first taken in saving account and then transferred to CGDS.

Lakshita Bhandari
CA, Mumbai
5572 Answers
661 Consultations

5.0 on 5.0

It is not advisable to claim the cost of improvement as deduction when there are no proofs available.


You can contact personally for capital gain calculations.


Yes, part of capital gains can be invested in bonds to claim proportionate exemption.

Lakshita Bhandari
CA, Mumbai
5572 Answers
661 Consultations

5.0 on 5.0

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