Adjustment of Capital Gains against purchase of alternate property

I have invested in a Villa Project for which i had purchased my portion of the land in the project in Jul 2014 (cost 22.70 Lakhs). The builder did not own the land. The construction of the Villa started on July 2014 and expected to complete in Aug 2016 when I will be receiving the possession of the house. The project cost was agreed at 45.0 lakhs and is being paid to the builder in installments as agreed in the contract. The final installment to be paid when i take possession. 
I had taken a bank loan to finance this project. 
Recently I have sold another piece of land owned by me towards financing this project (purchased in 2005). Sold this in Jul 2016 for 69.0 lakhs. The LTCG after indexation works out to 58.80
When filing my return can I adjust my CG against the purchase of the land and house.
How much will be my net Capital gains
Asked 5 months ago in Capital Gains Tax from Kochi, Kerala
Dear Tax Payer,
1) As per your computation, the capital gain on sale of land is amounting to Rs. 58.80 Lacs from the sale of land made in July 2016.
2) You are eligible for the capital gain  exemption under section 54F for the amount you deploy after the sale of land (July 2016) for the construction of your new villa provided you should not own more than one residential house property at the time of sale of the said land.
3) You have to deploy the money for the construction within a period of 3 years from the date of sale. 
4) Unutilized money as on 31 July 2016 must be kept it in a 'capital Gain account' with a nationalized bank in India. 
5) Please note that if you open the 'Capital Gain Account' after 31 July 2016, you will not be eligible for the capital gain exemption.
6) Interest on the bank loan can be claimed under section 24(b) with a limit of Rs. 2 Lakh for self occupied property and with no limit if the new villa is being rented out.

Regards,
CA. Rajeev P T, BBA, ACA, ACS
Email: ca.rajeevpt@gmail.com

*****This Opinion is based on stated facts and the legal position as on date. The views expressed may not be relevant where there is any change in facts or law. This Opinion is not in the nature of an assurance that an alternative view or interpretation cannot emerge
Rajeev P T
CA, Chennai
34 Answers
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Dear Sir,

Yes you can adjust your Long term Capital Gain if you invest the whole of the Capital Gain in purchasing a piece of land.

You can either invest it in Govt approved bonds within a period of 6 months from the date of sale but the maximum amount that can be invested in this section is Rs.50 Lacs and has a Lock in period of 3 years.

Please help us with the details in order to guide you in a proper manner. 

Trust this clarifies your query. 

Feel free to call back/ get back in case of further clarifications. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP.
Rohit R Sharma
CA, Mumbai
719 Answers
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Dear Tax Payer,

(1) Any amount you spend for construction of your villa out of the sale consideration AFTER THE DATE OF SALE OF LAND  (July 2016) ONLY eligible for 54F exemption.I understand that you had already paid this to the builder. Hence, you are not eligible for claiming exemption u/s 54F.
(2) Due to the above point, keeping unutlised amount to 'Capital Gain A/c' will not serve any purpose.
(3) The ONLY WAY TO SAVE TAX is to invest in 54EC Bonds within 6 months from the date of sale. Please do it at the earliest to avoid the last minute rush. You can invest upto 50 Lakhs. It has a lock-in period of 3 years.
(5) If you invest 50 Lakhs in 54EC bond, your capital gain tax would be 20% on 8.8 Lakhs (58.80 Lkahs-50 Lakhs).

Regards,
CA. Rajeev P T, BBA, ACA, ACS
Email: ca.rajeevpt@gmail.com

*****This Opinion is based on stated facts and the legal position as on date. The views expressed may not be relevant where there is any change in facts or law. This Opinion is not in the nature of an assurance that an alternative view or interpretation cannot emerge
Rajeev P T
CA, Chennai
34 Answers
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  Talk to Rajeev P T
Your answer is already being answered by other professionals will wait .
Shyam Sunder Modani
CA, Hyderabad
955 Answers
4.9 on 5.0
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Hello Sir,

You cannot adjust the Gain of Rs.58.80/- lakhs against the cost of Rs.45 Lakhs as the construction needs to start within 1year before the Date of Sale, which in your case is 2 years.

You can invest the the Sale proceeds upto Rs. 50 Lakhs in NHAI or REC Bonds within a time frame of 6 months from the date of sale. The balance amount will be subject to Tax.

Trust this clarifies your query. 

Feel free to call back/ get back in case of further clarifications. 

Thanking You. 

Regards,
Rohit R Sharma
BCOM, ACA, LLB-GEN, CERT. FAFP.  
Rohit R Sharma
CA, Mumbai
719 Answers
5.0 on 5.0
  Talk to Rohit R Sharma
Dear Sir,

You cannot adjust the Gain of INR 58.8 lacs against the INR 45 Lacs.To avail the benefit, you should have bought the house within 1 year before the date of Sale.

You can invest the the Sale proceeds upto INR 50 Lacs in NHAI or REC Bonds.
Abhishek Dugar
CA, Mumbai
766 Answers
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Dear Sir,

Please note that you cannot avail benefit of before one year in case of CONSTRUCTION. this benefit is available only in case of PURCHASE.
Abhishek Dugar
CA, Mumbai
766 Answers
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  Talk to Abhishek Dugar
Will wait.
Shyam Sunder Modani
CA, Hyderabad
955 Answers
4.9 on 5.0
  Talk to Shyam Sunder Modani

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