- I sold our house in Jan 2017 and I am looking at reinvesting in another residential property to get tax exception. By which month and year should I be re-investing in another residential property to be able to get the tax exception? Is it by this fiscal end(march 2017) or I have more time? - I am also planning to sell a land in this month of march 2017. can the capital gain from Land sale also be reinvested into residential property to get tax exception.? Regards, Anjana
Hello Anjana,
You have to invest the money before 31st July 2017. If you can't utilise it till 31 July 2017, you have to put that money into capital gain saving deposit scheme and utilize it within 2 or 3 years frok the date of sale of old property.
Yes, you can reinvest capital gain from land in residential property to save taxes.
Please feel free to call/ revert in case of any doubts
Thanks and Regards
Abhishek Dugar
CA CS B.Com
Clarification - If financial year ends in March, just curious how we have time till July. Is it 6 months from date of sale that I need to invest within? And if I put it in capital gain saving deposit, then can I withdraw it anytime I find a property to invest?
You have time till you file return of income and last date of filing return of income is 31 July 2017.
Yeah, if you put in capital gain saving deposit, then you can withdraw it anytime within 2 years if you want to buy a ready to move property and within 3 years if you want to construct a property.
Please feel free to call/ revert in case of any doubts
Thanks and Regards
Abhishek Dugar
CA CS B.Com
Thanks a lot . this is helpful. Can u also help me with info on - Should I be investing the entire sale amount into new property for tax exception Or I would need to invest only the Capital Gain?
Hi,
As per the facts mentioned, it looks like you have sold a House which was occupied for residential purposes. So, you are covered by Section 54. So, you have to invest only the Capital Gain amount in buying within 2 years / constructing within 3 years, another House.
The amount of Capital Gains remaining un-utilized has to be deposited in Capital Gains Account Scheme on or before the due date of Filing Returns. The amount deposited in Capital Gain Account Scheme can only be utilized for buying/constructing a House and it will be paid directly to the Seller/Builder,as the case may be, on your behalf.
Dear Sir,
Invest currently the same in capital gain account and you can further invest it for purchase of new property within 6 months of sale of old property.
only invest the capital gain amount
Sir you need to invest only capital gains as you have sold a residential property.
Currently you need to invest only capital gain Amount. However, in case you sale land and invest in residential house, then you have to reinvest entire sale proceeds.
Please feel free to call/revert in case of any doubts
Thanks and Regards
Abhishek Dugar
CA CS B.Com
Hi,
you onl need to invest the capital gain amount.
Here are below various options available for your knowledge and clarity-
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:
I think the query is already clarified by other experts satisfactorily.
1. Sale of house in Jan 2017:
To claim exemption, the residential property has to be purchased within 2 years i.e. Dec 2018. If it is under-constructed property, then purchase can be made within 3 years i.e. Dec 2019.
The deadline of July is only for filing your return of income and not for purchasing the property. You'll only declare in your return that you will be claiming the said exemption.
You'll have to invest only the capital gains and not the sale proceeds.
If the amount is invested in capital gains savings account, then it can be withdrawn only to make payments for purchase of property.
2. Sale of Land in March 2017:
To enable us to answer this question in a better manner, please let us know whether how many residential properties do you own.
