Exemption of capital gain on investment of new house

Dear sir

Section 54 of the Income tax deals with the exemption of Long Term Capital Gains on sale of House Property. As per this section, there is no restriction that you should own only one house property to claim the exemption. Hence you can claim exemption from Long Term Capital gain on sale of House property by investing the same in new house property within stipulated time.

Kindly ensure the following to claim the exemption :-

1) The Property you are selling is a Long term Capital Asset. (ie.,) It should have been purchased more than 36 months ago

2) You have to purchase (or) Construct a new (Only one) Residential House Property within 2 years (in case of purchase) / within 3 years (in case of constrcution)

3) The house property so purchased or constructed should not be sold/transferred within a period of 3 years from the date of purchase or construction.

4) If you decide to purchase/construct house property and could not do so before the due date of filing the Return of Income, you should open a deposit account wth a bank under Capital Gain Account Scheme. The withdrawls from this account should be used only for Purchase/Construction of House property within the stipulated time limit.

Kindly revert back in case of further queries

Thanks & regards

- CA B S Sridhar

Chennai

sridharca@gmail.com

The following paper will be required :-

1) Copy of the Purchase deed (for the property being sold now) for proof of cost of purchase of date of purchase

2) Copy of the sale deed (for the property being sold now) ensure that the sale value is not less than the value adopted for stamp duty purposes, for sale value proof

3) If you are purchasing a new property, the copy of the new property purchase deed

4) If you are going to construct the house property and planning to invest the proceeds in the Account under Capital Gain Account scheme, the same should be done before the due date of filing the return (July 31 in normal cases) and the copy of the investment proof shall also be kept as a proof of investment

These above will suffice.

Dear Sir,

You can sell one house and buy a new one. There is no bar in section 54 for owning more than one houses.

There are certain conditions which you need to fulfill on order to claim exemption:

1.The house you are selling should be a Long term Capital Asset (held for more than 3 years).

2. You have to purchase house property within 2 years or construct a new house property within 3 years. The house property so purchased or constructed should not be transferred within a period of 3 years from the date of purchase or construction.

Further you have to deposit the amount of capital gain taxes into CGDS scheme before the due date of return of income.

Please feel free to call/revert in case of any doubts

Thanks and Regards

Abhishek Dugar

CA CS B.com

Yes you can. In case of sale of residential property there is no restriction regarding the number of existing house.

Yes Sir, if you buy a new house property against the sale of an existing property you can claim the benefit.

Trust this clarifies your query.

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

Thanking You.

Regards,

Rohit R Sharma

BCOM, ACA, LLB-GEN, CERT. FAFP.