• Tax saving plan

I am going to sale my residential land  and building next month, advice me how best i can save it 
from property taxes and best ways to invest it for long term capital gain.
Asked 2 years ago in Capital Gains Tax from Guwahati, Assam
Dear sir,

Please keep in mind the following :-

1) At the time of sale, the property should be registered for the value not less than the value adopted for stamp duty purposes. Please ensure the same

2) The property is clearly mentioned as a Residential property in the Sale deed to be executed.

The following are the options available for you:-

1) You can Purchase/Construct another house property within 2 years (in case of purchase) / 3 years (in case of construction) from the date of sale.

2) The property so constructed/purchased should not be transferred/sold for next 3 years

3) If the sale proceeds are not used for construction/purchase of house property, the sale consideration shall be deposited in an account maintained in bank under Capital Gain Accounts scheme, before the due date of filing the return. (ie) For example , if you are selling in the month of Jan 2017, and till 31st July 2017, you are unable to use the amount for purchase/construction of another house property, the same should be deposited in Capital Gain account scheme deposit account with bank on or before 31st of Jul 2017. . The amount so deposited shall be used for purchase / construction of house property within 2/3 years as the case may be.

4) Another option is to purchase Capital Gain Bonds (NHAI/REC etc) which will be lock in for a period of 3 years and after three years, you are free to use the amount as per your requirement.

Kindly preseve the following documents for tax filing

1) Purchase deed copy of the property being sold
2) Sale deed copy
3) Any expenses incurred on sale- Proof for the same

Thank you

- CA B S Sridhar


B S Sridhar
CA, Chennai
43 Answers
18 Consultations

5.0 on 5.0

Dear sir,

If you are selling the property after holding it for 3 years or more, you can invest the amount of capital gain in buying a new house property in order to calik exemption.

Following conditions needs to be kept in mind.

1.A new residential house property must be purchased or constructed to claim the exemption
The new residential property must be purchased either 1 year before the sale or 2 years after the sale of the property/asset.
Or the new residential house property must be constructed within 3 years of sale of the property/asset

2.If you are not able to invest the specified amount in the manner stated above before the date of tax filing or 1 year from the date of sale, whichever is earlier, deposit the specified amount in a public sector bank (or other banks as per the Capital Gains Account Scheme, 1988).

3.Only ONE house property can be purchased or constructed.

4.Starting FY 2014-15 it is mandatory that this new residential property must be situated in India. The exemption shall not be available for properties bought or constructed outside India to claim this exemption.

If you don't want to invest in properties, you can buy NHAI/REC bonds within 6 month from the date of sale to avail exemption.

Please feel free to revert in case of any doubts

Thanks and Regards
Abhishek Dugar

Abhishek Dugar
CA, Mumbai
3578 Answers
161 Consultations

5.0 on 5.0

there are three ways in which you can get capital gain exemption 
if you planning to purchase another property or have already purchased one year back from the sale of the property then 
under section 54:
The exemption under this section is only available to persons that satisfy the following conditions:
    An individual or Hindu Undivided Family (HUF) that legally maintains ownership of the house property;
    The house property is used only for residential purposes;
    The house property is a long term capital asset, and was not transferred or sold within the first three years after the initial date of purchase or construction.

To claim the exemption, one must invest the proceeds derived from the sale of the house property into another residential house either within two years from the date of the sale or one year prior to sale, or one must invest in the construction of a new house within three years of the sale.

The exemption amount will be:
    Equal to the amount of the capital gains if the cost of the new house property is greater than the capital gains; or
    Equal to the cost of the new house property if the cost is less than the capital gains.

Meanwhile you can park your capital gain  (full amount or utilized amount) in CGAS (Capital Gain Account Scheme)
    This is only a stop-gap arrangement, as the funds have to be used to buy or build a house within the period specified.
    The deposited money can be used only to buy or construct a residential house within the prescribed time frame.
    If you withdraw funds from this account, they have to be used within 60 days.
    If you do not utilize the amount within three years of the sale of the first property, such un-utilized amount will be treated as LTCG this will lead to taxation of the unutilized amount as long-term capital gain after three years of the sale of the first / original property.
    The interest rates paid on these accounts are the same as those on regular savings and term deposits. Kindly note that interest earned on this account is taxable.

You can invest the capital gain amount in bonds under section 54EC:

    Capital gains from sale of any long-term asset can be claimed as tax-exempt under Section 54EC of the Income-Tax Act by investing in notified bonds within six months of the transfer of Asset.
    These bonds are issued by the Rural Electrification Corporation and the National Highways Authority of India.
    The exemption is equal to the investment or the capital gain, whichever is lower. If you transfer or take a loan against these bonds within three years, the capital gain will become taxable.
    These are redeemable after 3 years and must not be sold before the lapse of 3 years from the date of sale of the house property.
    You are allowed a period of 6 months to invest in these bonds, but before the Income Tax Return filing date (to claim this exemption).
    You can invest a maximum of Rs 50 lakh during a financial year in these bonds as per Budget 2015-16.

Vishakha Agarwal
CA, Bangalore
448 Answers
64 Consultations

5.0 on 5.0

sir i think the conversation is on with our professional colleague. If you have any doubts u can reach us on modani005@gmail.com
Shyam Sunder Modani
CA, Hyderabad
1408 Answers
106 Consultations

5.0 on 5.0

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