Sl No Property Purchase Value Purchase Date Sale Value Sale Date Capital Gain Amount
1 Land 700000 ( 7Lakh ) 21-07-2009 2200000 21-09-2017 around 9 lakh
2 Flat 17 Lakh 10-07-2010 - - Outstanding Loan 2.5 Lakh paid from
sale proceed of above
3 Flat 38 Lakh 17-02-2017 - - Loan from LICHFL 28 Lakh and
Personal Finance Rs 10 Lakh
Issue : Saving of Long Term Capital Gains of Propery sold at Sl No 1 ( Around 9 Lakh on 21-09-2017)
As per section 54
Within a period of one year before or two years after the date of transfer of old house, the taxpayer should acquire another residential house or should construct a residential house within a period of three years from the date of transfer of the old house. In case of compulsory acquisition the period of acquisition or construction will be determined from the date of receipt of compensation (whether original or additional).
Question :-
i) Can I claim Long Term Capital Gain Tax rebate on property purchased on 17th Feb 2017 as per Section 54 i.e getting new property before selling of old property. Sale Proceed is used to balance personal finance amount not the loan amount of property. Sale Proceed deposited in Personal Finance Account.
ii) Is any benefit possible in case I deposit all outstanding loan amount on 2nd Property which is taken in 2010 i.e 7 years before ( Outstanding amount around six lakhs)
Dear Sir,
Your case falls u/s 54F. Consideration of Rs.22 lacs can be used only for the purchase of one residential property and not for personal finance loan repayments or any home loan repayment. The net sale consideration should be used only for the purchase of new residential house property. Repayment of loans does not amount to investment in new house property. In your case no benefit of deduction will be available and you need to pay capital gain tax on Rs. 9 lacs.
Thanks
Hi,
You can claim benefit under sec 54F. Since you have sold an asset other than a house property Sec 54F will be applicable to you.
Sec 54F states that any Gain arising to an individual or HUF from the sale of any Long Term Asset other than Residential Property shall be exempt in full, if the entire net sales consideration is invested in
Purchase of one residential house within 1 year before or 2 years after the date of transfer of such an asset or in
Construction of 1 Residential House within 3 years after the date of such transfer
In case the whole sale consideration is not invested and only a part of the sale consideration is invested, exemption shall be allowed proportionately.
The above exemption would not be available if any of the below mentioned conditions is satisfied:-
The assessee does not own more than 1 Residential House Property on the date of transfer of such asset exclusive of the one he has bought for claiming exemption under section 54F.
The assessee purchases any residential house, other than the new asset, within a period of 1 year of the transfer of the old asset.
The assessee constructs any residential house, other than the new asset, within a period of 3 years after the date of the old asset.
The Assessee also has the option of depositing this amount in Capital Gains Account Scheme as explained in Section 54 above, before the due date of furnishing the Income Tax Return.
Now as per the provision since you are holding more than one house propert at the time of transfer of the property, the exemption will not be applicable to you and hence tax on the capital gains of 9 lakhs will have to be paid by you.
Hope this clarifies your query.
Hi..
The investment in property purchased in Feb 17 will be allowed as exemption for capital gains of land sold in Sep 17.
No other benefit.
Hi,
Answers are as below:
1) The benefit of cost of acquisition of 3rd property in Feb 2017 shall be clearly available in case of saving of LTCG arising from sale of 1st property as the 3rd property was acquired within 12 months prior to the date of sale of the 1st property. Hence, Rs. 9 Lakhs LTCG (not verified) arising shall be eligible for re-investment in 3rd property.
2) As far as repayment of loan on 2nd property is concerned through proceeds of sale of 1 st property is concerned, it is immaterial what is actually done with the cash/ bank balance once the benefit u/s 54 is taken against the cost of acquisition of 3rd property. You can definitely repay the loan but without any additional benefit other than saving of LTCG arising on 1st property through 3rd property.
I hope the same is clear.
Regards,
Hi,
Yes, you can very well claim the benefit u/s 54F since the Cost of the new property is higher than the sale proceeds. Another option you have is to invest the capital gains in Capital Gain tax saving bonds i.e NHAI or REC bonds within 6 months from the date of sale.
Regards,
Keerthiga Padmanabhan
M.Com., CA, LL.B
Hello,
1. Yes, you can very well adjust the Sale Proceeds against the property purchased on 17/02/2017.
2. No, repaying housing loan does not qualify as a deduction.
Trust this clarifies your query.
Feel free to call / get back in case of further clarifications.
Thanking You.
Regards,
Rohit R Sharma
BCOM, FCA, LLB, CERT. FAFP
One Clarification please. I purchased house of Rs 38 Lakhs with Bank Loan of Rs 28 Lakhs and personal fiance of Rs 10 Lakh . Plot sold value rs 22 Lakh. Will i get full exemption or part . Is it necessary to save capital gain i have to show utilization of 22 Lakhs. It is suggested that deposit 22 Lakhs in Loan Account against 28 lakhs. My question is that even house cost is 38 Lakhs more than 22 Lakhs of sold value but being Loan Amount of Rs 28 Lakhs, it will be problem for claiming exemption in 54 F. Kindly clarify