My mother sold a residential land for rs. 85lakhs. Indexed inflation cost was Rs. 41 lakhs. and within 1-3 months she purchased aresidential property for rs. 54lkahs . what is her Itax liablity as per your opinion and also u/s 54f/ my lawer says that either pay rs. 20% of 43 lakhs i.e lTCG of rs. 43laks or construct a house on pirchase residential land atleast with construction value of rs. 30 lak which is your direct LTCG i.e rs. 85 minus rs. 54 lakh approx. rs. 30 lakh. why value or expenditure spent in purchasing residential land for rs. 54 lakh no accounted for. is this is must as per u/s 54F. Kindly advise.
Hi,
I am confused as to whether your mother purchased a residential house property (I.e. flat/apartment etc.) or a residential land?
Please clarify. My answer will depend on this.
Please feel free to call/ revert in case of you need more clarity.
Thanks and regards
Abhishek Dugar
CA CS B.Com
Yes. He is correct. Acquiring a residential land only, couldn't be claimed as an exemption under Section 54F. You must construct some structures.
If you are not investing 30 lakhs more as said by your consultant, you may construct a basic structure of house for a lesser amount (say, 6 lakhs). Then, you may claim proportionate exemption for capital gains.
In case of sale of house property you have to re invest only capital gain part but in case of other then house property we have to invest whole sales consideration to save tax
Brief details are as under
If you are using your entire sale proceeds to buy a house property you may end up paying no tax on your gains when – You satisfy all these conditions
(a) You purchase ONE house within 1 yr before the date of transfer or 2 yrs after or construct ONE house within 3 yrs after the date of transfer.
(b) You do not sell this house within 3 yrs of purchase or construction
(c) This new house purchased or constructed must be situated in India
(d) You should not own more than 1 residential house (other than the new one) on the date of transfer
(e) You do not purchase within a period of 2 yrs after such date or construct within a period of 3 years after such date any residential house (other than the new one).
When you satisfy these conditions and invest entire sale proceeds towards the new house – you won’t pay any tax on your gains. However, if you invest a portion of the sale proceeds, the exemption will be the proportion of the invested amount to the sale price or exemption = cost of new house x capital gains/net consideration.
Hello,
Yes, your lawyer is correct but instead you can invest the Funds in Capital Gain Tax Saving Bonds which has a lock in period of 3 years and avoid the hassle.
Trust this clarifies.
Regards,
Keerthiga Padmanabhan
M.Com., CA, LL.B
Hello,
Yes, your advocate is correct you can either build a property on the same investment property or can invest the funds in Capital gain Tax Saving Bonds upto a maximum of Rs. 50 Lacs within a time frame of 6 months from the date of sale.
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
