Articles
How to save / avoid Long Term Capital Gain (LTCG) Tax on Sale of a House
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So, you’ve sold your house and have earned a hefty amount in profit. But you don’t want to pay any income tax on this profit! Is there any legitimate way to do this? Yes, there are more than one ways!
This article explains how income tax can be totally avoided (of course, totally legally!) on long term capital gain (LTCG) earned from the sale of a house.
This article explains how income tax can be totally avoided (of course, totally legally!) on long term capital gain (LTCG) earned from the sale of a house.
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In the previous two articles on the series on capital gains, we saw:
1. "Long Term and Short Term Capital Gain - Income Tax Calculation": Difference between long term and short term capital gain, and its taxation |
2. "Long Term Capital Gains (LTCG) on Sale of a House – Calculation and Income Tax": Step-by-step calculation of long term capital gain on sale of a house. (The article also has a table of cost inflation index numbers from FY 1980-81 to FY 2007-08)
Now, let’s see how long term capital gain earned from the sale of a house (a flat or an apartment or an independent house - any residential property) can be avoided altogether!
(Note: There is no way to save income tax on the short term capital gain earned from the sale of a house. This article deals specifically with long term capital gain)
There are two ways to save the income tax on the long term capital gain earned from the sale of a house. Let’s understand each in detail.
1. Invest in Bonds – Section 54EC (Sec 54EC of the Income Tax (IT) Act, 1961)
You can save the income tax on the LTCG from the sale of a house, if the long term capital gain is invested in specified bonds.
These include bonds issued by the National Highways Authority of India (NHAI), the Rural Electrification Corporation (REC), Small Industries Development Bank of India (SIDBI), National Housing Bank (NHB) or National Bank of Agricultural and Rural Development (NABARD).
(Also read "Should you invest in Sec 54EC LTCG tax saving bonds?")
How Much is Exempt
The amount of LTCG exempt from income tax is equal to the amount invested in these bonds.
Thus, if you invest the entire LTCG in these bonds, the full amount would be exempt from income tax.
Please note that here, you have to consider the amount of the long term capital gain, and not the entire sale proceeds.
For example, you sell your house for Rs. 15 Lakhs, and your long term capital gain from this sale is Rs. 10 Lakhs.
Now, if you invest Rs. 10 Lakhs in these bonds, you would not pay any income tax on this gain!
(You don’t have to invest the full sale proceed of Rs. 15 Lakhs – you just need to invest the LTCG)
Instead, if you invest, say, Rs. 6 Lakhs in these bonds, you would have to pay a long term capital gains tax on the remaining LTCG of Rs. 4 Lakhs.
Thus, you would pay 20% of Rs. 4 Lakhs = Rs. 80,000 as long term capital gains tax.
When to Invest
The investment in these bonds has to be made within 6 months of the sale of the house in order to claim exemption (or relief) under section 54EC.
Availability of Bonds
Please note that the availability of these bonds might be limited, as each of these agencies has a cap on the amount of bonds it can issue.
Therefore, please check the availability of these bonds, and plan your sale accordingly if you are planning to take advantage of Sec 54EC.
Interest Rate of Capital Gains Bonds
The interest rate on these bonds varies from one agency to another, and changes from time to time.
For example, the 54EC Capital Gains Tax Exemption Bonds Series-VIII issued by the REC (starting 28th May 2008 and open till 31st March 2009) carries an interest rate of 5.75%.
The 54EC Capital Gains Bonds issued by NHAI (starting from 26th May 2008 to 31st March 2009) also carry an interest rate of 5.75%.
So, should you invest in Section 54EC bonds?
Please read "Should you invest in Sec 54EC LTCG tax saving bonds?". You would find a comparison between investments made in Sec 54EC bonds, and some other options.
(Continue to Page 2 to know the 2nd method - How you can invest in a house to save the entire tax on LTCG...)
Other articles you might be interested in:
- Long Term Capital Gains (LTCG) on Sale of a House – Calculation and Income Tax
- Long Term and Short Term Capital Gain - Income Tax Calculation
- How to fill Income Tax Return Form 1 (ITR1) - Instructions and Video Tutorial
- The stock market is falling – Time to invest?
- Residential / Commercial Property for a Non Resident Indian (NRI)
- An introduction to Hedge Funds
- Banks increase interest rates for deposits and lending (loans)
- Matthews India Fund MINDX: A good proxy to invest in India
- Why does the financial / fiscal year start from 1st April?
- Tata AIG - Maharaksha Accident and Injury Policy
- Provident Fund (PF) and Voluntary Provident Fund (VPF)
- New Ebook Launched: "Investing In Gold - Everything You Should Know"
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Comments
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Author:
gauri
Jul 25, 2008
Jul 25, 2008
LTCG from sale of house
That is really helpful article. Only thing, i couldn't get clarified is : i sell the house, which was bought 4 yrs back with loan. do i need to return the benefits received in IT on principal & interest. if yes, how to account it in ITR-2
Re: LTCG from sale of house
Thanks Gauri!
I have an article on income tax benefits of home loans, and this issue has been discussed there.
I request you to refer the comments section of the article "Income Tax (IT) Benefits of a Home Loan / Housing Loan / Mortgage"
LTCG from sale of house
Sir,
One question.
If the has two house and a land in his name and he sells one house. In this case can he invest only the gains in REC bonds to save the full tax ?
Thanks
TK
One question.
If the has two house and a land in his name and he sells one house. In this case can he invest only the gains in REC bonds to save the full tax ?
Thanks
TK
Re: LTCG from sale of house
Hi,
Yes, even if you hold multiple houses / land, you can invest the capital gains in bonds like REC bonds to save capital gains tax.
Yes, even if you hold multiple houses / land, you can invest the capital gains in bonds like REC bonds to save capital gains tax.
Re: LTCG from sale of house
[Continuation of query from Rathor]
Dear Raag,
Thank you for your reply. That was helpful. I have one more small query.
If I choose to pay my tax on LTCG, how can I file online?
From this site https://onlineservices.tin.nsdl.com/etaxnew/tdsnontds.jsp, which option should be chosen.
Dear Raag,
Thank you for your reply. That was helpful. I have one more small query.
If I choose to pay my tax on LTCG, how can I file online?
From this site https://onlineservices.tin.nsdl.com/etaxnew/tdsnontds.jsp, which option should be chosen.
Re: LTCG from sale of house
Dear Rathor,
The tax on LTCG is to be paid like any other tax. Therefore, please choose "CHALLAN NO./ITNS 280 (payment of Income tax & Corporation Tax) " to pay the tax.
You can pay it as advance tax or self assessment tax, as per the case.
The tax on LTCG is to be paid like any other tax. Therefore, please choose "CHALLAN NO./ITNS 280 (payment of Income tax & Corporation Tax) " to pay the tax.
You can pay it as advance tax or self assessment tax, as per the case.
Author:
Nitin
Nov 27, 2008
Nov 27, 2008
Can we adjust LTCG on land sale against purchase of new house?
I have sold land and some earned profit. Same year I have invested in a new house which is under construction. Can I get deduction of LTCG gain against investment of house?
Re: Can we adjust LTCG on land sale against purchase of new house?
Hi Nitin,
Income tax on LTCG from sale of land can not be saved by investing it in another house.
Income tax on LTCG from sale of land can not be saved by investing it in another house.
Author:
rajesh
Nov 27, 2008
Nov 27, 2008
LTCG tax
i had invested 12,000/- in land in 1981 and have sold the same this month. as per the jantri rates i have received rs 1,44,000/- towards the sale of this land.
pl. advice me if i have to pay LTCG tax on this.
what will be indexed cost of the land now??
am i eligible for tax exempt if i invest in a house now from this proceeds.
pl. advice me if i have to pay LTCG tax on this.
what will be indexed cost of the land now??
am i eligible for tax exempt if i invest in a house now from this proceeds.
Re: LTCG tax
Hi Rajesh,
For 1981-82, the cost inflation index is 100. For 2008-09, it is 582.
Therefore, your indexed cost of acquisition is Rs. 12,000 * (582/100) = Rs. 69,840.
LTCG = Rs. 1,44,000 - Rs. 69,840 = Rs. 74,160.
You would need to pay LTCG in this amount.
You can not claim exemption from LTCG tax if you invest this amount in a house - that benefit is available only if the LTCG is from the sale of a house, and not land / plot.
For 1981-82, the cost inflation index is 100. For 2008-09, it is 582.
Therefore, your indexed cost of acquisition is Rs. 12,000 * (582/100) = Rs. 69,840.
LTCG = Rs. 1,44,000 - Rs. 69,840 = Rs. 74,160.
You would need to pay LTCG in this amount.
You can not claim exemption from LTCG tax if you invest this amount in a house - that benefit is available only if the LTCG is from the sale of a house, and not land / plot.
Author:
Arpita
Dec 01, 2008
Dec 01, 2008
Is Long Term Tax exemption possible on two properties
I want to sell one house and with the long term gain I want to buy two residential houses . Will I get Tax exemption benefit for both the houses? If one, how is one chosen - as per higher price or as which is purchased earlier.
Re: Is Long Term Tax exemption possible on two properties
Hi Arpita,
LTCG tax exemption is available if the LTCG is invested in another house within the stipulated period.
The number of houses is not relevant - you can invest in 2 houses.
LTCG tax exemption is available if the LTCG is invested in another house within the stipulated period.
The number of houses is not relevant - you can invest in 2 houses.
Author:
Manuj
Dec 29, 2008
Dec 29, 2008
Tax benefit on house sold received by will
I received a home constructed in 1982 by will from my grnadfather. I sold the house this year. How much tax i need to pay in the amount received? In which column it should be mentioned.
Re: Tax benefit on house sold received by will
Hi Manuj,
Please read the article "Long Term Capital Gains (LTCG) on Sale of a House – Calculation and Income Tax".
This article has step-by-step guidance about calculation of capital gains on sale of a house.
Author:
venkat
Jan 02, 2009
Jan 02, 2009
LTCG on sale of land and house
dear sir- i have two questions wrt ltcg
1. if i invest the LTCG from sale of house in bonds specified section 54, then would the interest paid by these bonds taxable. for eg if the coupon rate of say nhai bond is 6%, then the interest that i receive annually from the bond taxable? if so details of the same.
2. how can i offset the ltcg arising out of sale of land?
regards,
venkat
1. if i invest the LTCG from sale of house in bonds specified section 54, then would the interest paid by these bonds taxable. for eg if the coupon rate of say nhai bond is 6%, then the interest that i receive annually from the bond taxable? if so details of the same.
2. how can i offset the ltcg arising out of sale of land?
regards,
venkat
Re: LTCG on sale of land and house
Hi Venkat,
1. Yes, the interest on such bonds is taxable. This interest is included under the head "Other Income" in your tax return, and is taxed as per prevailing IT slabs (just like the interest received from a savings bank account).
2. There is no such avenue for saving the LTCG from sale of land.
1. Yes, the interest on such bonds is taxable. This interest is included under the head "Other Income" in your tax return, and is taxed as per prevailing IT slabs (just like the interest received from a savings bank account).
2. There is no such avenue for saving the LTCG from sale of land.
Author:
venkat
Jan 03, 2009
Jan 03, 2009
LTCG on sale of land and house
thanks sir. btw, is there an article in this site which talks on how one can invest directly in bonds and what are the tax implications on the same?
Author:
venkat
Jan 04, 2009
Jan 04, 2009
section 54ec bonds
dear sir- does the list of bonds in which one can invest to save ltcg in this article latest?
as per the article "These include bonds issued by the National Highways Authority of India (NHAI), the Rural Electrification Corporation (REC), Small Industries Development Bank of India (SIDBI), National Housing Bank (NHB) or National Bank of Agricultural and Rural Development (NABARD). "
if not can you provide the latest list of bonds?
thanks
as per the article "These include bonds issued by the National Highways Authority of India (NHAI), the Rural Electrification Corporation (REC), Small Industries Development Bank of India (SIDBI), National Housing Bank (NHB) or National Bank of Agricultural and Rural Development (NABARD). "
if not can you provide the latest list of bonds?
thanks
Re: LTCG on sale of land and house
Hi Venkat,
No, as of now, there is no article like that. But it is a good idea for an article - thanks!
No, as of now, there is no article like that. But it is a good idea for an article - thanks!
Re: section 54ec bonds
Hi Venkat,
These institutions have various "issues" of these bonds, and each issue has its start and end date.
So, at any given point in time, one of these institutions have their bond issues going on. (Although there might be times when there are no bonds available).
Any list that I publish on this website would thus become stale very quickly.
For the current status of the bonds, it would be best to check the website of these issuers.
These institutions have various "issues" of these bonds, and each issue has its start and end date.
So, at any given point in time, one of these institutions have their bond issues going on. (Although there might be times when there are no bonds available).
Any list that I publish on this website would thus become stale very quickly.
For the current status of the bonds, it would be best to check the website of these issuers.
Author:
venkat
Jan 04, 2009
Jan 04, 2009
section 54ec bonds
dear sire, i should have framed my previous question a little better to get the correct response :(
let rephrase that question. to offset ltcg on sale of house, one should invest in the bonds issued by nhai or rec or sidbi or nabard or nhb. my question was "has this list grown or shrunk ?".
ie there can be a case where the latest budget might have removed this benefit for investing in the bonds issued by nhai & rec.
i hope my question is clearer now.
thanks again
let rephrase that question. to offset ltcg on sale of house, one should invest in the bonds issued by nhai or rec or sidbi or nabard or nhb. my question was "has this list grown or shrunk ?".
ie there can be a case where the latest budget might have removed this benefit for investing in the bonds issued by nhai & rec.
i hope my question is clearer now.
thanks again
Author:
Biten Kathrani
Jan 10, 2009
Jan 10, 2009
Capital Gains tax
My father has sold a house 6 months back and immediatley after sale we have put the money in a Capital gains account as we intend to invest in another housing property.
We have located the property but the builder has said that the house in a combination flat and so 2 agreements will be made. the total value is a little more than the value that we need to invest as per capital gains calculations.
Is it necessary to invest in a single house under a single agreement to meet the rules of sec 54 or is it legally allowed to invest in a combination flat in the same building on the same floor adjoining each other purchased under 2 agreements. Will he get the full value of the interms of tax relief.
Please clarify.
Biten
We have located the property but the builder has said that the house in a combination flat and so 2 agreements will be made. the total value is a little more than the value that we need to invest as per capital gains calculations.
Is it necessary to invest in a single house under a single agreement to meet the rules of sec 54 or is it legally allowed to invest in a combination flat in the same building on the same floor adjoining each other purchased under 2 agreements. Will he get the full value of the interms of tax relief.
Please clarify.
Biten
Author:
Raman
Jan 16, 2009
Jan 16, 2009
Query on capital gains tax
Dear Sir, I bought a house in December 2004 for 11 lakhs out of which home loan portion was 8 lakhs and home improvement loan portion was 3 lacs. Out of 11 lakhs, I had put 1.5 lakhs from my own sources. I sold the house in Aug 2008 for 20 lakhs. Now, how much will be my capital gains liability? My annual income is around 4 lacs. When & How should I pay the capital gains tax? Is there any Advance Tax liability involved? If so, when? If the date of adv tax has already expired, how much interest should I pay?
I had invested 3.7 lakhs in a land. Will this investment help me in reducing my capital gains tax liability? If so, how? Is it necessary to add the capital gains in the tax calculation by my office or I can show it when I submit my returns. I would be grateful if you could answer my above queries. Thank you.
I had invested 3.7 lakhs in a land. Will this investment help me in reducing my capital gains tax liability? If so, how? Is it necessary to add the capital gains in the tax calculation by my office or I can show it when I submit my returns. I would be grateful if you could answer my above queries. Thank you.
Re: section 54ec bonds
Hi Venkat,
In my opinion, the list remains the same even after the budget.
In my opinion, the list remains the same even after the budget.
Re: Capital Gains tax
Hi Biten,
Yes, it is necessary to invest the capital gain in only 1 house. So, you would not be able to buy 2 flats and claim the tax benefit - you would need to invest in a single property.
(Note: This is because the income tax act says that the the investment of the capital gain has to be in 'a' residential house, implying that it can't be in multiple houses).
Yes, it is necessary to invest the capital gain in only 1 house. So, you would not be able to buy 2 flats and claim the tax benefit - you would need to invest in a single property.
(Note: This is because the income tax act says that the the investment of the capital gain has to be in 'a' residential house, implying that it can't be in multiple houses).
Re: Query on capital gains tax
Hi Raman,
You bought the house in Dec 2004 for 11 Lakhs, and sold it in Aug 2008 for 20 lakhs.
The LTCG, after indexation, is Rs. 6,66,250.
(For details on LTCG calculation, please read Long Term Capital Gains (LTCG) on Sale of a House – Calculation and Income Tax).
You should have paid the advance tax on this by 15th September. Since the amount is large, the interest burden can become rather high.
To find out the interest that you would need to pay, please read "Missed the income tax return (ITR) filing deadline?".
If you haven't paid the tax on it, please try to pay it as soon as you can.
Investment in land doesn't have any income tax benefits - so, your investment of Rs. 3.7 lakhs would not result in any tax savings.
It is not mandatory to show the capital gain to your office, but the advantage of declaring it to your office's finance department is that they would include it in your income tax calculations, and deduct the TDS from your salary accordingly - which means that you would pay the income tax on time and save any interest payment.
Author:
Raman
Jan 19, 2009
Jan 19, 2009
Clarification on your reply
I have forgotten to mention that while purchasing the house, I paid Rs.64,000 towards stamp duty, 3,000 towards deed writing expenses and Rs.16,000 towards brokerage though I dont have written proof for payment towards deed writing exp and brokerage. Similarly, I paid 30,000 towards brokerage while selling the house. Will this help in reducing my capital gains tax burden? If so, by how much? Pls help. Thank you.
Re: Clarification on your reply
Hi Raman,
Yes, you can benefit from all these.
Please include the stamp duty paid, the deed writing cost and the brokerage amount in the cost of acquisition.
Also, you can treat brokerage paid for selling the house as expense towards the sale of the house, and can deduct it from the sale proceeds.
Thus, it would have a significant impact in your tax liability.
Note: It would protect you if you can get the receipts of the deed writing cost and brokerage. If the charges are within the prevailing norm, it might not be difficult to convince the assessing officer (AO), though.
Yes, you can benefit from all these.
Please include the stamp duty paid, the deed writing cost and the brokerage amount in the cost of acquisition.
Also, you can treat brokerage paid for selling the house as expense towards the sale of the house, and can deduct it from the sale proceeds.
Thus, it would have a significant impact in your tax liability.
Note: It would protect you if you can get the receipts of the deed writing cost and brokerage. If the charges are within the prevailing norm, it might not be difficult to convince the assessing officer (AO), though.
Author:
K.G.GARG
Feb 03, 2009
Feb 03, 2009
Income tax benefit on sold of a residensial land
Sir,when I WAS student of 22yr old my parent purchase a residensial land on my name.now my yr. income is 1.5 lacs.This.land has been sold after 16 yr. and capital gain is 9 lacs. i want to purchase new house/land or invest in two properties. can i benefitted from income tax on purchase of house/land or invested in more than one properties.
thanks
thanks
Re: Income tax benefit on sold of a residensial land
Hi,
You can save tax in two ways:
1. Under section 54EC: You can save tax by investing the LTCG amount (of Rs. 9 Lakhs) in section 54EC bonds.
2. Under section 54F: You can invest the entire sale proceed (and not just the LTCG) in a house and save LTCG tax - provided you do not have any other house in your name.
Thus, coming to your question, you can save tax by investing in a house if you do not have any house in your name. You can not invest in 2 properties - it has to be one house.
Also, you would not be able to save any tax if you invest in land.
You can save tax in two ways:
1. Under section 54EC: You can save tax by investing the LTCG amount (of Rs. 9 Lakhs) in section 54EC bonds.
2. Under section 54F: You can invest the entire sale proceed (and not just the LTCG) in a house and save LTCG tax - provided you do not have any other house in your name.
Thus, coming to your question, you can save tax by investing in a house if you do not have any house in your name. You can not invest in 2 properties - it has to be one house.
Also, you would not be able to save any tax if you invest in land.
Author:
K.G.GARG
Feb 08, 2009
Feb 08, 2009
Clarification on your reply
entire sale proceed means total sale amount? can some amount from this i can utilised on construction / furnishing?
Author:
Kiran Parmar
Feb 09, 2009
Feb 09, 2009
Income tax benefit in repayment of housing loan from capital gaing tax
Can i gat benefit in tax if i make repayment of my another housing loan from capital gain avail from sale of other housing property.
Author:
sandeep arora
Feb 10, 2009
Feb 10, 2009
LTCG tax
I have sold my flat for Rs. 19.71 lacs in July 2008. Out of total amount, I received Rs. 5 lacs as token payment in June 2008 & balance Rs.14.71 lacs on 10th July 2008. I had deposited the money received (Rs. 19.71 lacs) in my savings bank account.
I want to invest the LTCG in purchase of new flat. What is the deadline for investing in purchase of new flat so as to save LTCG tax ?
I want to invest the LTCG in purchase of new flat. What is the deadline for investing in purchase of new flat so as to save LTCG tax ?
Re: Clarification on your reply
Dear K G Garg,
Yes, "entire sale proceeds" means the total sale amount less any expense incurred for the sale (like brokerage).
You need to spend this amount to buy / construct a house. But you can not spend it on furniture if you want to claim exemption.
Yes, "entire sale proceeds" means the total sale amount less any expense incurred for the sale (like brokerage).
You need to spend this amount to buy / construct a house. But you can not spend it on furniture if you want to claim exemption.
Re: Income tax benefit in repayment of housing loan from capital gaing tax
Hi Kiran,
You can not save capital gain tax by housng loan repayment (from the gain or otherwise).
You can not save capital gain tax by housng loan repayment (from the gain or otherwise).
Re: LTCG tax
Hi Sandeep,
You need to invest the LTCG in a new house / flat within 2 years of selling the old house / flat.
If the new house is being constructed, the construction should be completed within 3 years of the sale of your house.
If your want to buy a new house using the money received from the sale of your house, but you are unable to purchase it by the time you file your income tax return (this is 31st July in most cases), you have to deposit the money in a Capital Gains Scheme of Deposit Account (CGSDA) to claim the benefits of Sec 54.
The amount deposited in this account is deemed to be invested in another house.
Please read
Page 2 of this article to more about this.
Author:
AAhmed
Feb 21, 2009
Feb 21, 2009
Saving LTCG from sale of inherited property
Hello Raag,
I came across your site when i was searching for answers for my issues i have. I think this is one of the best sites with lot of information.
My question to you is I will be getting my share of 87 laks asLTCG which i will be getting in March from an inherited property what will be the best option to avoid tax?
a) Buy a plot and construct a house with ground floor and first floor? Is this allowed to spend on two floors in the same plot or do i have to spend the amount only on the ground floor?
b) If 2 floors are allowed in the same house, can i give the first floor for rent?
c) Which is the best option you advice? Investment in bonds at this moment and wait for three years or construct a house with multiple floors? The other limitation i have is only 50 laks can be invested in bonds which is the maximum.
d) If there is any other option available, can you explore the possibility of that option?
Thanks in advance
I came across your site when i was searching for answers for my issues i have. I think this is one of the best sites with lot of information.
My question to you is I will be getting my share of 87 laks asLTCG which i will be getting in March from an inherited property what will be the best option to avoid tax?
a) Buy a plot and construct a house with ground floor and first floor? Is this allowed to spend on two floors in the same plot or do i have to spend the amount only on the ground floor?
b) If 2 floors are allowed in the same house, can i give the first floor for rent?
c) Which is the best option you advice? Investment in bonds at this moment and wait for three years or construct a house with multiple floors? The other limitation i have is only 50 laks can be invested in bonds which is the maximum.
d) If there is any other option available, can you explore the possibility of that option?
Thanks in advance
Re: Saving LTCG from sale of inherited property
Hi,
Thanks a lot for the kind words.... I am glad that I could be of help.
a) You can construct any number of floors as long as all are registered as one house.
b) Yes, you can give the first floor on rent. In fact, you can also give the entire house on rent.
c) I have done an analysis of this in another article. You can read "Should you invest in Sec 54EC LTCG tax saving bonds?" for more on this.
Also, I do not know of any upper limit of Rs. 50 Lakhs for investments in section 54EC tax saving bonds.
d) The only options are the ones you are considering - investment in section 54EC bonds, and investing in a house. There are no more options!
Note: You said that you would get the LTCG from "property". I am assuming that it is from the sale of a house.
If it is from the sale of land / plot, you can save tax only by investing in a house - and in that case, you would have to invest the whole sale proceed (and not just the LTCG amount). This would be under section 54F.
Author:
AAhmed
Feb 23, 2009
Feb 23, 2009
Re: Re: Saving LTCG from sale of inherited property
Hello Sir,
Thank you very much for your response.
The inherited property is a land and is not a house.
In your answer, at the end, You mean to say that the only option left for me is investing in house? I dont have any option of investing in bonds? Am I correct?
Could you please spare your time to answer this question?
Thanks
Thank you very much for your response.
The inherited property is a land and is not a house.
In your answer, at the end, You mean to say that the only option left for me is investing in house? I dont have any option of investing in bonds? Am I correct?
Could you please spare your time to answer this question?
Thanks
Re: Re: Re: Saving LTCG from sale of inherited property
Hi AAhmed,
Yes, if the LTCG is from the sale of land, then the only option for you is to invest in a house.
Also, you would have to invest the whole sale proceed - and not just the LTCG amount.
Yes, if the LTCG is from the sale of land, then the only option for you is to invest in a house.
Also, you would have to invest the whole sale proceed - and not just the LTCG amount.
Author:
Jayanth
Mar 02, 2009
Mar 02, 2009
LTCG exemption through bonds- on basic or indexed
U have specified that the LTCG needs to be invested in bonds to avoid the tax. My query is as under:
Indexed cost of property is 10lakhs. Non-indexed is 5 lakhs. sale price is 12 lakhs. So i need to invest 2 lakhs in the specified bonds or 7 lakhs.
Please help
Indexed cost of property is 10lakhs. Non-indexed is 5 lakhs. sale price is 12 lakhs. So i need to invest 2 lakhs in the specified bonds or 7 lakhs.
Please help
Re: LTCG exemption through bonds- on basic or indexed
Hi Jayanth,
You would need to invest Rs. 2 Lakhs.
You would need to invest Rs. 2 Lakhs.
Author:
Jaynath
Mar 03, 2009
Mar 03, 2009
Re: LTCG exemption through bonds- on basic or indexed
Thanks a lot, not just for putting up such an informative site but also for so promptly and kindly responding to queries.
Keep up the good work & we will continue supporting it.
Thanks
Keep up the good work & we will continue supporting it.
Thanks
Re: Re: LTCG exemption through bonds- on basic or indexed
Hi Jaynath,
Thanks a lot for the encouragement and the patronage.... I am really glad that I am being of help.
Thanks a lot for the encouragement and the patronage.... I am really glad that I am being of help.
What costs towards house can be indexed ?
Hi,
First of all thank for this informative and very useful site. It's probably the best I have seen so far.
You mentioned in one of your answers above, that stamp duty, registration charges, brokerage can be added to cost of acquisition. What about property tax, does the same apply ?
Also can stamp duty/registration charges/brokerage/property tax be indexed using cost inflation index ? Or is it just to be subtracted from total sale proceeds for tax computation.
Thank you for your help.
Regards,
Prashant
First of all thank for this informative and very useful site. It's probably the best I have seen so far.
You mentioned in one of your answers above, that stamp duty, registration charges, brokerage can be added to cost of acquisition. What about property tax, does the same apply ?
Also can stamp duty/registration charges/brokerage/property tax be indexed using cost inflation index ? Or is it just to be subtracted from total sale proceeds for tax computation.
Thank you for your help.
Regards,
Prashant
Re: What costs towards house can be indexed ?
Hi Prashant,
Thanks a lot for the kind words... It is really encouraging!
Property tax can not be added to the cost of acquisition.
Stamp duty, registration charges and brokerage incurred at the time of purchase can be added to the cost of acquisition and can be indexed.
Brokerage and legal charges incurred at the time of sale should be directly subtracted from the sale proceeds to get the net sale proceeds.
Thanks a lot for the kind words... It is really encouraging!
Property tax can not be added to the cost of acquisition.
Stamp duty, registration charges and brokerage incurred at the time of purchase can be added to the cost of acquisition and can be indexed.
Brokerage and legal charges incurred at the time of sale should be directly subtracted from the sale proceeds to get the net sale proceeds.
Author:
Amal
Mar 15, 2009
Mar 15, 2009
Possession of house within two years?
if i reinvest the money obtained by sale of housing property (after 36 months of its purchase) in another house within two years by booking flat in a housing scheme, however possession of the same is not obtained within those two years, will i be eligible for exemption of income tax on long term capital gains
Re: Possession of house within two years?
Hi Amal,
The act says that you need to purchase the property within two years.
This means that you should have paid the money and be the legal owner (through a sales agreement) - possession is not necessary.
The act says that you need to purchase the property within two years.
This means that you should have paid the money and be the legal owner (through a sales agreement) - possession is not necessary.
Author:
Amal
Mar 18, 2009
Mar 18, 2009
Missed the Bonds
thanks for removing the confusion..
what are the implications if the LTCG is not put in 'Bonds' in between the period of sale and purchase of the new one.
what are the implications if the LTCG is not put in 'Bonds' in between the period of sale and purchase of the new one.
Re: Missed the Bonds
Hi Amal,
Looks like there is some confusion - the LTCG is not to be kept in bonds in the period between sale of original asset and purchase of new asset.
Investment in bonds is a method to save tax on LTCG, and if you invest in bonds, you don't have to purchase another house to save tax.
However, if you have time between sale of original asset and purchase of new asset, you have to put the money in an escrow account, as described in the article.
If you do not put the money in the escrow account, you would not be able to claim any tax benefit on LTCG - you would need to pay the LTCG tax.
Looks like there is some confusion - the LTCG is not to be kept in bonds in the period between sale of original asset and purchase of new asset.
Investment in bonds is a method to save tax on LTCG, and if you invest in bonds, you don't have to purchase another house to save tax.
However, if you have time between sale of original asset and purchase of new asset, you have to put the money in an escrow account, as described in the article.
If you do not put the money in the escrow account, you would not be able to claim any tax benefit on LTCG - you would need to pay the LTCG tax.
Author:
Sandeep
Mar 25, 2009
Mar 25, 2009
When can I buy bonds?
I have a question about tax savings bonds for LTCG.
I have sold my property on Dec 31st 2008. How soon should I be purchasing these bonds?
what I found is that both REC and NHAI issues close by Mar 31 2009. Is it possible to get bonds in 2009-2010 period before the 6 month from sale date deadline that I have? Will these organizaiton post new issues for 2009-2010 in that timeline?
I have sold my property on Dec 31st 2008. How soon should I be purchasing these bonds?
what I found is that both REC and NHAI issues close by Mar 31 2009. Is it possible to get bonds in 2009-2010 period before the 6 month from sale date deadline that I have? Will these organizaiton post new issues for 2009-2010 in that timeline?
Re: When can I buy bonds?
Hi Sandeep,
you can buy the bonds upto 6 months after the sale - subject to availability of the bonds.
I am not sure about the bond issue time table - in any case, it is advisable to buy bonds as soon as possible when they are available.
This way, you would start earning your interest immediately, and your lock-in period would also start immediately.
you can buy the bonds upto 6 months after the sale - subject to availability of the bonds.
I am not sure about the bond issue time table - in any case, it is advisable to buy bonds as soon as possible when they are available.
This way, you would start earning your interest immediately, and your lock-in period would also start immediately.
Author:
Parag Tilwankar
Apr 09, 2009
Apr 09, 2009
LTCG
Hi,
I am purched New flat in Feb2008 @8 lac
I sold my old flat in April2009 @5.68lac
This old flat I am Purchase in Jan2000 @ 2.4 Lac
Can I pay LTCG tax or it is squre off or how much amount I have to Invest in LTCG tax saving bond
Best Regards,
Parag Tilwankar
I am purched New flat in Feb2008 @8 lac
I sold my old flat in April2009 @5.68lac
This old flat I am Purchase in Jan2000 @ 2.4 Lac
Can I pay LTCG tax or it is squre off or how much amount I have to Invest in LTCG tax saving bond
Best Regards,
Parag Tilwankar
Re: LTCG
Hi Parag,
The cost inflation index for 2009-2010 has not been notified yet, so it would be difficult to assess your exact tax liability.
But going by the CII of 2008-09, your long term capital gain is Rs. 2,08,925. You would need to purchase tax saving bonds for this amount.
(To know how to calculate the LTCG on sale of house, please read "Long Term Capital Gains (LTCG) on Sale of a House – Calculation and Income Tax")
Your purchase of a house in Feb 2008 would not help you save tax, because the purchase was more than 1 year before the sale of the old house.
Author:
sandeep arora
Apr 18, 2009
Apr 18, 2009
Re: Re: LTCG Tax
This is with reference to your reply dated 10th Feb, 2009.
I have sold my flat for Rs. 19.71 lacs in July 2008. I want to buy a new house using the money received from the sale of my house, but will be unable to purchase it by the time of filing my income tax return. I therefore want to deposit the money in a Capital Gains Scheme of Deposit Account (CGSDA).
Pl. advise whether I should deposit the entire sales proceeds, or I can deposit only LTCG in Capital Gains Scheme of Deposit Account (CGSDA) to claim the benefits of Sec 54.
I have sold my flat for Rs. 19.71 lacs in July 2008. I want to buy a new house using the money received from the sale of my house, but will be unable to purchase it by the time of filing my income tax return. I therefore want to deposit the money in a Capital Gains Scheme of Deposit Account (CGSDA).
Pl. advise whether I should deposit the entire sales proceeds, or I can deposit only LTCG in Capital Gains Scheme of Deposit Account (CGSDA) to claim the benefits of Sec 54.
Re: Re: Re: LTCG Tax
Hi Sandeep,
You only need to deposit the LTCG amount, not the entire sale proceed.
You only need to deposit the LTCG amount, not the entire sale proceed.
Author:
Rathor
Apr 20, 2009
Apr 20, 2009
Inherited property
Dear Sir,
We (Mother, brother and Me) have a joint ownership of a land which was transferred to our name (property is now in name of my mother, brother and me (jointly held)) as legal successor after my father passed away.
Now, we want to sell that property and also save on the long term capital gains tax. We have a few questions. Please help with your advice.
1. As we understand, after the property sale, the sale proceeds (for eg: let us assume that the capital gains is Rs.30 Lakhs) will be equally shared between the three of us.
2. I am a salaried person and my mother is a dependent. Can I and my mother jointly purchase an apartment to save the long term capital gains tax and we pay 10 Lakhs each (total 20 lakhs) for purchasing the apartment (apartment value Rs. 40 Lakhs) and I apply for a loan for remaining 20 Lakhs.
Please note that I also have an existing home loan (I am eligible for this extra Rs. 20 Lakhs loan based on my current income)
3. My brother invests his share of 10 lakhs in a house and takes a separate home loan to save his long term capital gains tax.
4. Can I gift a house to my third brother? Do I / he have to pay any form of gift tax / stamp duty, etc ?
5. Can my mother from her savings gift Rs. 10 Lakhs to her son? Does she / son have to pay any gift tax ?
Thanks and Regards,
TR.
We (Mother, brother and Me) have a joint ownership of a land which was transferred to our name (property is now in name of my mother, brother and me (jointly held)) as legal successor after my father passed away.
Now, we want to sell that property and also save on the long term capital gains tax. We have a few questions. Please help with your advice.
1. As we understand, after the property sale, the sale proceeds (for eg: let us assume that the capital gains is Rs.30 Lakhs) will be equally shared between the three of us.
2. I am a salaried person and my mother is a dependent. Can I and my mother jointly purchase an apartment to save the long term capital gains tax and we pay 10 Lakhs each (total 20 lakhs) for purchasing the apartment (apartment value Rs. 40 Lakhs) and I apply for a loan for remaining 20 Lakhs.
Please note that I also have an existing home loan (I am eligible for this extra Rs. 20 Lakhs loan based on my current income)
3. My brother invests his share of 10 lakhs in a house and takes a separate home loan to save his long term capital gains tax.
4. Can I gift a house to my third brother? Do I / he have to pay any form of gift tax / stamp duty, etc ?
5. Can my mother from her savings gift Rs. 10 Lakhs to her son? Does she / son have to pay any gift tax ?
Thanks and Regards,
TR.
Re: Inherited property
Hi Rathor,
- You and your mother can jointly purchase an apartment to save the long term capital gains tax.
- You can take another home loan for this apartment even if you have another home loan (of course, subject to the bank's appraisal of your repaying capacity - which should not be a problem since you are saying that you are eligible for it)
- Your brother can invest his share in a house to save his long term capital gains tax, and can take a separate home loan
- You can gift the house to your third brother. Yes, stamp duty would be payable.
- Your mother can gift Rs. 10 Lakhs to her son - she / son would not have to pay any gift tax.
- You and your mother can jointly purchase an apartment to save the long term capital gains tax.
- You can take another home loan for this apartment even if you have another home loan (of course, subject to the bank's appraisal of your repaying capacity - which should not be a problem since you are saying that you are eligible for it)
- Your brother can invest his share in a house to save his long term capital gains tax, and can take a separate home loan
- You can gift the house to your third brother. Yes, stamp duty would be payable.
- Your mother can gift Rs. 10 Lakhs to her son - she / son would not have to pay any gift tax.
Author:
sandeep arora
Apr 22, 2009
Apr 22, 2009
LTCG
For being eligible for long term capital gains, one has to hold the house for minimum three years. Suppose I purchase a flat in a building under constrcution where agreement for sale is signed (by paying part amount, balance to be paid in installments) & registered immediately in May 2009, but the handing over of posession by the Developer is after 12-18 months. Then whether the three year period will be counted from date of agreement for sale i.e. May 2009 or from date of handing over of posession by Developer i.e. after 12-18 months.
Rgds.
Rgds.
Re: LTCG
Hi Sandeep,
In this case, the period would start from the time of getting possession.
In this case, the period would start from the time of getting possession.
Author:
KSK
May 15, 2009
May 15, 2009
LTCG and purchase of new house
Dear Sir:
Please accept my congratulations on such a useful website which contains a lot of useful information. I had a query and would be grateful if you could very kindly throw light on the issue:
I purchased a plot at Bangalore on 17th January 2005. Constructed a house on the same which got completed in the second half of March 2008. Although we occupied part of the house in the end of January 2008, could not apply for permanent electricity connection because floor polishing and interior works were going on. Got the permanent electricity connection in the end of March 2008 after the works got completed.
I had a share in parental property at Sonipat which I got pursuant to the death of my mother in the year 2003 as per her last registered will. This parental property has been sold and registered on 16th March 2009 for a sum of Rs. 15 lacs and the entire proceeds have been utilized to repay part of my my housing loan of Rs. 50 lacs.
The two dates which are crucial is occupation of the new house in March 2008 end and the second one sale of parental property on 16th March 2009.
Can I claim exemption from Capital Gains Tax which amounts to Rs. 10 lacs plus because valuation of parental property is being taken as of 1st April 1981? My chartered accountant is of the opinion that I cannot take advantage because he is going on the text of the rule which says:
“The transferor assessee should purchase a residential house in India within a period of one year before or two years from the date of transfer or construct a residential house within three years from the date of the transfer of the original house. (Construction must be completed within these 3 years.)
As per him it is not a purchase of new house. Rather the purchase process started on 17th January 2005.
Your well considered opinion in this respect will be highly appreciated.
Regards
KSK
Please accept my congratulations on such a useful website which contains a lot of useful information. I had a query and would be grateful if you could very kindly throw light on the issue:
I purchased a plot at Bangalore on 17th January 2005. Constructed a house on the same which got completed in the second half of March 2008. Although we occupied part of the house in the end of January 2008, could not apply for permanent electricity connection because floor polishing and interior works were going on. Got the permanent electricity connection in the end of March 2008 after the works got completed.
I had a share in parental property at Sonipat which I got pursuant to the death of my mother in the year 2003 as per her last registered will. This parental property has been sold and registered on 16th March 2009 for a sum of Rs. 15 lacs and the entire proceeds have been utilized to repay part of my my housing loan of Rs. 50 lacs.
The two dates which are crucial is occupation of the new house in March 2008 end and the second one sale of parental property on 16th March 2009.
Can I claim exemption from Capital Gains Tax which amounts to Rs. 10 lacs plus because valuation of parental property is being taken as of 1st April 1981? My chartered accountant is of the opinion that I cannot take advantage because he is going on the text of the rule which says:
“The transferor assessee should purchase a residential house in India within a period of one year before or two years from the date of transfer or construct a residential house within three years from the date of the transfer of the original house. (Construction must be completed within these 3 years.)
As per him it is not a purchase of new house. Rather the purchase process started on 17th January 2005.
Your well considered opinion in this respect will be highly appreciated.
Regards
KSK
Re: LTCG and purchase of new house
Hi KSK,
Thanks a lot for the appreciation...
Unfortunately, I would have to agree with your CA. A house consists of both the land and the structure, and since the land was purchased way back in 2005, this house would not help you save the LTCG tax.
Also, since you have used the amount of sale proceed to repay your housing loan, even that would not help you save any LTCG tax.
I'm sorry - I know this is not the answer you were hoping for!
Thanks a lot for the appreciation...
Unfortunately, I would have to agree with your CA. A house consists of both the land and the structure, and since the land was purchased way back in 2005, this house would not help you save the LTCG tax.
Also, since you have used the amount of sale proceed to repay your housing loan, even that would not help you save any LTCG tax.
I'm sorry - I know this is not the answer you were hoping for!
Author:
Saurabh
May 15, 2009
May 15, 2009
Saving LTCG tax on sale of agricluture land
sir/madam,
I am having a query related to capital gain taxes.
My grandmother sold a peice of agricluture land coming in urban area in october 2008 for an amount of Rs 1.30 crores. Now she wants to save on cpital gain by inveting the amount into agriculture land or residential house.
now my queries are :
1) As i am not fining a appropriate land or house to invest in, by the mean time can i park the funds in the capital gain account with nationalized bank?
2) is SBI bank having this facility of capital gain account? whihc other bank does have this facilty to name a few? what would be the rate of interest we would recieve form this account?
3) the time period of two years to invest in land or house will start form the sale of land i.e 20 october'2008 or it will be till the tax filling date ?
4) by which date i need to invest the money into capital gain account to save on taxes?
kindly give solutions to my problems.
thansking you
I am having a query related to capital gain taxes.
My grandmother sold a peice of agricluture land coming in urban area in october 2008 for an amount of Rs 1.30 crores. Now she wants to save on cpital gain by inveting the amount into agriculture land or residential house.
now my queries are :
1) As i am not fining a appropriate land or house to invest in, by the mean time can i park the funds in the capital gain account with nationalized bank?
2) is SBI bank having this facility of capital gain account? whihc other bank does have this facilty to name a few? what would be the rate of interest we would recieve form this account?
3) the time period of two years to invest in land or house will start form the sale of land i.e 20 october'2008 or it will be till the tax filling date ?
4) by which date i need to invest the money into capital gain account to save on taxes?
kindly give solutions to my problems.
thansking you
Re: Saving LTCG tax on sale of agricluture land
Hi Saurabh,
The tax on the sale amount can be saved under section 54B. The time of two years to invest will start form the date of sale of land.
This is a big topic, so I would write an article dedicated ot this with all the details - thanks for suggesting a great article idea!
The tax on the sale amount can be saved under section 54B. The time of two years to invest will start form the date of sale of land.
This is a big topic, so I would write an article dedicated ot this with all the details - thanks for suggesting a great article idea!
Author:
Arun
Jun 12, 2009
Jun 12, 2009
STCG on property
Hi Raag,
A few doubts on this :
1) From when does the 36 months (to determine whether its STCG or LTCG) start ?.... is it from date of registration of property or is it from date of first payment to the builder ?
2) I had purchased the house (which i am now planning to sell) against a bank loan. I have also spent additional money for some additional work done on it. So, will actual cost of property for me be : (indexed value of property + interest paid on bank loan + amount spent on additional work) ? Hence STCG = sale price minus the above cost of property ?
This is a very usefyul site - thankyou very much.
Arun
A few doubts on this :
1) From when does the 36 months (to determine whether its STCG or LTCG) start ?.... is it from date of registration of property or is it from date of first payment to the builder ?
2) I had purchased the house (which i am now planning to sell) against a bank loan. I have also spent additional money for some additional work done on it. So, will actual cost of property for me be : (indexed value of property + interest paid on bank loan + amount spent on additional work) ? Hence STCG = sale price minus the above cost of property ?
This is a very usefyul site - thankyou very much.
Arun
Author:
Haripriya
Jun 14, 2009
Jun 14, 2009
Capital gains tax on two properties
Sir/Madam,
I have a query on capital gains tax.
My mother holds two residential properties. One was bought 10 yrs back and the other one was bought 3 years back. We would like to sell the one bought recently and reinvest in another residential property.
I understand capital gains tax exemption can be claimed only on the primary property. How do we determine which is the primary property? Is it the first property i sell or is there any criteria to declare the same for Income tax?
I have a query on capital gains tax.
My mother holds two residential properties. One was bought 10 yrs back and the other one was bought 3 years back. We would like to sell the one bought recently and reinvest in another residential property.
I understand capital gains tax exemption can be claimed only on the primary property. How do we determine which is the primary property? Is it the first property i sell or is there any criteria to declare the same for Income tax?
Re: STCG on property
Hi Arun,
I am glad you liked the site.
1. There have been a lot of court cases based on this, and it is a little ambiguous.
However, the date of registration of property can be safely treated as date of purchase in most cases.
2. Interest paid on housing loan can not be included in the cost of the property. So,
STCG = Sale price minus any brokerage incurred on the sale minus (cost price of the property + amount spent on additional work)
Please note that the benefit of indexation of cost is not available for STCG - it is available only for LTCG.
I am glad you liked the site.
1. There have been a lot of court cases based on this, and it is a little ambiguous.
However, the date of registration of property can be safely treated as date of purchase in most cases.
2. Interest paid on housing loan can not be included in the cost of the property. So,
STCG = Sale price minus any brokerage incurred on the sale minus (cost price of the property + amount spent on additional work)
Please note that the benefit of indexation of cost is not available for STCG - it is available only for LTCG.
Re: Capital gains tax on two properties
Hi Haripriya,
It looks like you have some misunderstanding - there is no concept of a "primary property" when it comes to saving LTCG on sale of a house.
Therefore, there is no question of declaring a house as a primary property.
It looks like you have some misunderstanding - there is no concept of a "primary property" when it comes to saving LTCG on sale of a house.
Therefore, there is no question of declaring a house as a primary property.
Author:
pavan
Jun 24, 2009
Jun 24, 2009
invest 2 capital gain deposits in 1 constructed residence
dear sir,
me and my brother had got a capital gain deposit of Rs. 5,00,000/- each on selling our ancestral property. and we both deposited such amount in capital gain deposit scheme with Andra bank.now we are planning to construct a house jointly for our residential purpose as we have no house, using the both of our capital gains(5L + 5L). the site now we are going to construct the house jointly,is in the name of our two brothers. ours is a undivided family. can we both jointly construct the house for our residence purpose using both of our capital gains. please let me know and help me in this regard. both of us r IT acessees
me and my brother had got a capital gain deposit of Rs. 5,00,000/- each on selling our ancestral property. and we both deposited such amount in capital gain deposit scheme with Andra bank.now we are planning to construct a house jointly for our residential purpose as we have no house, using the both of our capital gains(5L + 5L). the site now we are going to construct the house jointly,is in the name of our two brothers. ours is a undivided family. can we both jointly construct the house for our residence purpose using both of our capital gains. please let me know and help me in this regard. both of us r IT acessees
Re: invest 2 capital gain deposits in 1 constructed residence
Hi Pavan,
Yes, you can. Make sure that the construction is completed in the stipulated time period.
Yes, you can. Make sure that the construction is completed in the stipulated time period.
LTCG
dear sir,
thanks alot for ur reply. it is so helpful and useful for me. i had one more small query.
we already started the construction process and duly maintaining the bills and receipts for the spent amount for construction process. and we r submitting a duplicate copy of such bills and receipts to the bank for bank records.
we informed the manager of the bank, that we 2 brothers were constructing the house jointly using both of our LTCG deposits of 5L+5L. the manager objected for that, as, the municipal plan approval is in my name, even though the site we r constructing the house is in both of brothers name jointly. (really we don't know such problem will arise with the plan approval).
sir what r we supposed to do now. please help us in this regard and let me know what to do.
thanks alot for ur reply. it is so helpful and useful for me. i had one more small query.
we already started the construction process and duly maintaining the bills and receipts for the spent amount for construction process. and we r submitting a duplicate copy of such bills and receipts to the bank for bank records.
we informed the manager of the bank, that we 2 brothers were constructing the house jointly using both of our LTCG deposits of 5L+5L. the manager objected for that, as, the municipal plan approval is in my name, even though the site we r constructing the house is in both of brothers name jointly. (really we don't know such problem will arise with the plan approval).
sir what r we supposed to do now. please help us in this regard and let me know what to do.
Author:
Arpit
Jul 02, 2009
Jul 02, 2009
Long term capital gain on sale of plot and exemption under section 54F
Respected Sir, i have a question regarding section 54F,Kindly inform me whether constrution of a new floor on existing residential house will be eligible for exemption under section 54F.if capital gain is arising on sale of long term plot. also mention any decided case laws if any.
thanx.
thanx.
Re: LTCG
Hi Pavan,
I am sorry, but I am not really sure what can be done. Probably, the house would be considered in your name as the plans have been approved in your name. Thats why the bank is objecting.
It might make sense to take advise from a lawyer in this case.
I am sorry, but I am not really sure what can be done. Probably, the house would be considered in your name as the plans have been approved in your name. Thats why the bank is objecting.
It might make sense to take advise from a lawyer in this case.
Re:Long term capital gain on sale of plot and exemption under section 54F
Hi Arpit,
The investment has to be in a new house. Construction of a floor for an existing house would not qualify.
The investment has to be in a new house. Construction of a floor for an existing house would not qualify.
Author:
Arpit
Jul 04, 2009
Jul 04, 2009
regarding your answer
thanx for your answer,can u tell me any decided case law or any refrence to support the answer.
Re: regarding your answer
Hi Arpit,
I'm sorry, I would not be able to quote any case law. In case you need specifics, I advise you to contact a practicing chartered accountant (CA).
I'm sorry, I would not be able to quote any case law. In case you need specifics, I advise you to contact a practicing chartered accountant (CA).
Hello
hello,
Let me first say that what an excellent website, highly informative & educational.
I have a clarification w.r.t LTCG,
my purchase cost is @ 3 lakhs
Indexed cost @ 9 Odd
sale price @ 30
LTCG @ 20 odd
If i'am to buy a new house costing 35 Odd
with 20 lakhs from the sale proceeds & 15 lakhs via housing loan.
how Would this 20 lakhs investment into a new house be treated as ? Would i still be liable to pay tax ?
best regards
mohan
Let me first say that what an excellent website, highly informative & educational.
I have a clarification w.r.t LTCG,
my purchase cost is @ 3 lakhs
Indexed cost @ 9 Odd
sale price @ 30
LTCG @ 20 odd
If i'am to buy a new house costing 35 Odd
with 20 lakhs from the sale proceeds & 15 lakhs via housing loan.
how Would this 20 lakhs investment into a new house be treated as ? Would i still be liable to pay tax ?
best regards
mohan
Re: Hello
Hi Mohan,
Thanks for the kind words...
You would not need to pay any tax if you invest the entire long term capital gain (Rs. 20 Lakhs in your case) in another house.
The LT capital gain would be exempt from income tax under Section 54 of the Income Tax (IT) Act.
(Please check out page 2 of this article for complete details of the provisions)
Thanks for the kind words...
You would not need to pay any tax if you invest the entire long term capital gain (Rs. 20 Lakhs in your case) in another house.
The LT capital gain would be exempt from income tax under Section 54 of the Income Tax (IT) Act.
(Please check out page 2 of this article for complete details of the provisions)
dead link
Hello raag,
the link for the second page is a dead link...
regards
mohan
the link for the second page is a dead link...
regards
mohan
LTCG
dear sir,
thanks for your reply sir. we really don't know what to do now sir. we don't have any other sources for completing the construction of the house. can there be any chance of canceling the capital gain deposit of 5L of my brother and pay tax for the amount as we r canceling the capital gain deposit before the due date. please let me know sir
thanks for your reply sir. we really don't know what to do now sir. we don't have any other sources for completing the construction of the house. can there be any chance of canceling the capital gain deposit of 5L of my brother and pay tax for the amount as we r canceling the capital gain deposit before the due date. please let me know sir
Author:
GP
Jul 14, 2009
Jul 14, 2009
Can I repay existing home loan with capital gain
Hi,
Can you please advice if I can avoid tax by using capital gained from sale of property to pay my home loan?
If not, what are the other options?
Regards,
Prakash
Can you please advice if I can avoid tax by using capital gained from sale of property to pay my home loan?
If not, what are the other options?
Regards,
Prakash
Re: dead link
Hi Mohan,
The link has been corrected. Thanks for pointing out!
The link has been corrected. Thanks for pointing out!
Re: LTCG
Hi Pavan,
You can surely pay the tax due on the capital gain amount - no one would object if you want to pay tax!
However, I suggest you to take advise from a practicing CA who would be able to better guide you as per the specifics of your case.
You can surely pay the tax due on the capital gain amount - no one would object if you want to pay tax!
However, I suggest you to take advise from a practicing CA who would be able to better guide you as per the specifics of your case.
Re: Can I repay existing home loan with capital gain
Hi GP,
No, you can not save tax on LTCG by pre-paying or repaying a home loan.
The options for saving income tax on LTCG are buying a house or buying specific bonds - the details are as described in this article.
No, you can not save tax on LTCG by pre-paying or repaying a home loan.
The options for saving income tax on LTCG are buying a house or buying specific bonds - the details are as described in this article.
LTCG
dear sir,
thanks a lot for your valuable suggestion sir. I'll let you know again after consulting a practicing CA. thanks a lot once again. ur website and ur suggestions are very helpful and valuable for me.
thanks a lot for your valuable suggestion sir. I'll let you know again after consulting a practicing CA. thanks a lot once again. ur website and ur suggestions are very helpful and valuable for me.
LTCG
I am an NRI and plan to sell a property bought for 8 lacs in 1993 for 41 lacs today. Please let me know how LTCG tax maybe saved and are the following possible
a) credit the chk for 41 lacs into my NRO account and repatriate the funds to Dubai (where I stay) and buy a property here. I understand that NRIs can avail of section 54 by purchasing property abroad according to below article I saw.
http://www.indianrealtynews.com/real-estate-trends/nris-can-now-save-tax-on-homes-bought-abroad.html
b) Put the money in an escrow account and buy property in India within 2 years. However, should I change my mind, can I debit the escrow and buy a Govt bond under sec 54 instead?
c) If I gift this property to my father who is also an NRI, what will be tax obligation, both for me and for him?
d) What is tax obligation for someone selling a property after receiving it as gift? Does indexation start from original date of property purchase or from date of gift received?
a) credit the chk for 41 lacs into my NRO account and repatriate the funds to Dubai (where I stay) and buy a property here. I understand that NRIs can avail of section 54 by purchasing property abroad according to below article I saw.
http://www.indianrealtynews.com/real-estate-trends/nris-can-now-save-tax-on-homes-bought-abroad.html
b) Put the money in an escrow account and buy property in India within 2 years. However, should I change my mind, can I debit the escrow and buy a Govt bond under sec 54 instead?
c) If I gift this property to my father who is also an NRI, what will be tax obligation, both for me and for him?
d) What is tax obligation for someone selling a property after receiving it as gift? Does indexation start from original date of property purchase or from date of gift received?
Re: LTCG
Hello M S Bhatia,
a) From the article, it appears that it would be possible, as the law doesn't say that the house has to be bought in India. The case sited helps!
b) No, that would not be possible. Investment in bonds has to be made within 6 months of the sale.
c) There would be no tax on the gift - either on you or him. However, there would be other charges like stamp duty and registration. And he would have to pay tax on any capital gain at the time of selling the property.
d) Indexation starts from the original date of property purchase. The cost of acquisition is also the original price paid by the person who gave the property as a gift.
a) From the article, it appears that it would be possible, as the law doesn't say that the house has to be bought in India. The case sited helps!
b) No, that would not be possible. Investment in bonds has to be made within 6 months of the sale.
c) There would be no tax on the gift - either on you or him. However, there would be other charges like stamp duty and registration. And he would have to pay tax on any capital gain at the time of selling the property.
d) Indexation starts from the original date of property purchase. The cost of acquisition is also the original price paid by the person who gave the property as a gift.
Author:
Surjit
Jul 20, 2009
Jul 20, 2009
54EC binds - through banks or agents?
An Investment of Rs. 1 Crore in two accounts is to be made in NHAI or REC Bonds for exemption U/s 54 EC of Income Tax Act. Please advise whether amount to be deposited in any bank directly or to be invested through some agent.
Re: 54EC binds - through banks or agents?
Hello Mr. Surjit,
For NHAI bonds, you can approach any branch of IDBI Bank and selected branches of Syndicate Bank, HDFC Bank & Punjab National Bank. For REC bonds, you can approach Canara Bank or HDFC Bank.
Please note that there is an upper limit for investment - for both REC and NHAI bonds, the maximum amount you can invest is Rs. 50 Lakhs
For NHAI bonds, you can approach any branch of IDBI Bank and selected branches of Syndicate Bank, HDFC Bank & Punjab National Bank. For REC bonds, you can approach Canara Bank or HDFC Bank.
Please note that there is an upper limit for investment - for both REC and NHAI bonds, the maximum amount you can invest is Rs. 50 Lakhs
Author:
Mallikarjun
Jul 20, 2009
Jul 20, 2009
HUF and rent
I have 2 properties flat with no home loan at present. i am paying income tax on another home showing rental.my query is
1)can i create a HUF account and transfer one flat into it to save income tax from rental income?
2)can i sell the flat on which there is long term gain and buy 2 properties from the gain amount?
1)can i create a HUF account and transfer one flat into it to save income tax from rental income?
2)can i sell the flat on which there is long term gain and buy 2 properties from the gain amount?
Re: HUF and rent
Hi Mallikarjun,
1. If you transfer your own property / money to a Hindu Undivided Family (HUF), any income generated from such a property / money is clubbed with your own income and is taxed accordingly. Thus, you would not gain anything from income tax perspective by moving your property to HUF.
2. Yes, you can.
1. If you transfer your own property / money to a Hindu Undivided Family (HUF), any income generated from such a property / money is clubbed with your own income and is taxed accordingly. Thus, you would not gain anything from income tax perspective by moving your property to HUF.
2. Yes, you can.
Author:
toocool
Jul 21, 2009
Jul 21, 2009
Sale of rights in a capital asset
I have booked a flat three years back and I am yet to receive the possession as the building is not yet complete and as such this cannot be treated as House property. Now if I am getting a chance to sell my right in this flat and as this right is in a capital assets can I claim the gain as long term capital gain and thereafter claim exemption under section 54F by investing in property.
Re: Sale of rights in a capital asset
Hi TooCool,
Yes, this should be possible.
Yes, this should be possible.
Author:
Vishal Jain
Aug 02, 2009
Aug 02, 2009
LTCG
Sir,
I purchased a new house for 46 Lacs in July 2009. I have taken home loan of 38 lacs for this new purchase. i sold my existing flat in August 2009 for 25 lacs. Can i use this 25 lacs to repay the housing loan of 38 lacs which i have taken for buying this new flat and avoid LTCGT
I purchased a new house for 46 Lacs in July 2009. I have taken home loan of 38 lacs for this new purchase. i sold my existing flat in August 2009 for 25 lacs. Can i use this 25 lacs to repay the housing loan of 38 lacs which i have taken for buying this new flat and avoid LTCGT
Author:
Venkat
Aug 04, 2009
Aug 04, 2009
LTCG Question
Dear Sir,
Thanks for sharing a wealth of complex information in simple terms which goes a long way in helping nitwits in finance like me.
I purchased a flat in Jan 2004 for Rs. 24 Lakhs. I had paid 10 Lakhs of this from my NRE funds and the other 14 Lakhs through a home loan. I am an NRI and I have been paying back the loan through NRE funds only. I am now selling this flat for Rs. 75L (Aug 09).
1. Can I just hold the LTCG funds in my SB(NRO) account for 6-8 months as I shall be buying another property by then? Or is it mandatory to hold the funds in bonds or the CGSDA account with a bank in this interim?
2. Can I include the Stamp Duty and Registration charges in the 'purchase' price of the flat? Should I calculate by the inflation index ratio after adding the stamp duty and charges?
3. Can I repatriate part of the sale proceeds (the funds I had invested directly as well as the bank loan repayment I have done so far) as all the funds paid so far are NRE funds?
Looking forward to receiving your help.
Thanks
Thanks for sharing a wealth of complex information in simple terms which goes a long way in helping nitwits in finance like me.
I purchased a flat in Jan 2004 for Rs. 24 Lakhs. I had paid 10 Lakhs of this from my NRE funds and the other 14 Lakhs through a home loan. I am an NRI and I have been paying back the loan through NRE funds only. I am now selling this flat for Rs. 75L (Aug 09).
1. Can I just hold the LTCG funds in my SB(NRO) account for 6-8 months as I shall be buying another property by then? Or is it mandatory to hold the funds in bonds or the CGSDA account with a bank in this interim?
2. Can I include the Stamp Duty and Registration charges in the 'purchase' price of the flat? Should I calculate by the inflation index ratio after adding the stamp duty and charges?
3. Can I repatriate part of the sale proceeds (the funds I had invested directly as well as the bank loan repayment I have done so far) as all the funds paid so far are NRE funds?
Looking forward to receiving your help.
Thanks
Re: LTCG
Hi Vishal,
You would not be able to avoid tax on LTCG if you use the LTCG amount to repay your home loan.
You would not be able to avoid tax on LTCG if you use the LTCG amount to repay your home loan.
Re: LTCG Question
Hi Venkat,
Thanks for the liberal praise...
1. No. It needs to be invested in a CGSDA account.
2. Yes. Yes.
3. Yes, you should be able to do this.
Thanks for the liberal praise...
1. No. It needs to be invested in a CGSDA account.
2. Yes. Yes.
3. Yes, you should be able to do this.
Author:
Ajantha G
Aug 08, 2009
Aug 08, 2009
LTCG
Hi,
Totally appreciate your effort and congratulations on your success!
I have received LTCG of 25 L on sale of an ancestral property. Can i save on the tax by investing the whole amount in constructing a new house on a plot which has been purchased 6 years back.
Totally appreciate your effort and congratulations on your success!
I have received LTCG of 25 L on sale of an ancestral property. Can i save on the tax by investing the whole amount in constructing a new house on a plot which has been purchased 6 years back.
Author:
Kartik
Aug 10, 2009
Aug 10, 2009
LTCG from sale of residential house
Hello,
I had bought a house for 10 lakhs and sold it for 30 lakhs in March 2008.
I have kept the money in a CGSDA account. I wanted to know what amount should be invested to avoid capital gains the whole 30 lakhs or the differential after calcualting the cost of inflation.
In case I need to invest the whole amount, can I invest the same in an underconstruction property provided I pay the 30 lakhs as down payment.
In case if I get the possession after 20 months from today, will I be liable for LTCG ?
Looking forward for your help.
I had bought a house for 10 lakhs and sold it for 30 lakhs in March 2008.
I have kept the money in a CGSDA account. I wanted to know what amount should be invested to avoid capital gains the whole 30 lakhs or the differential after calcualting the cost of inflation.
In case I need to invest the whole amount, can I invest the same in an underconstruction property provided I pay the 30 lakhs as down payment.
In case if I get the possession after 20 months from today, will I be liable for LTCG ?
Looking forward for your help.
Re:LTCG
Hi Ajantha,
Thanks a ton....
I do not think this would be possible - a house consists of land + the structure. So, if the land has been acquired 6 years ago, this would not satisfy the condition of LTCG exemption.
Thanks a ton....
I do not think this would be possible - a house consists of land + the structure. So, if the land has been acquired 6 years ago, this would not satisfy the condition of LTCG exemption.
Re:LTCG from sale of residential house
Hi Kartik,
1. Only the LTCG amount needs to be invested, not the entire Rs. 30 Lakhs.
2. Yes.
3. No - as long as the sale agreement, registration and payment are done within the required time frame, you should get LTCG exemption.
1. Only the LTCG amount needs to be invested, not the entire Rs. 30 Lakhs.
2. Yes.
3. No - as long as the sale agreement, registration and payment are done within the required time frame, you should get LTCG exemption.
Author:
Kannan
Nov 11, 2009
Nov 11, 2009
LTCG
Sir, I have a flat purchased 15 years ago. Recently I have disposed off aplot of land owned by me.
1. Can I avoid the LTCG by investing in another flat?
2. If I have to invest in Bonds, I understand that it has to be done within 6 months. This period would be reckoned from the date of registration when the final amount is paid or from the date of sale agreement when a token amopunt is paid?
3. Can the amount be kept in one's normal S.B. account during the 6 month period or till is invested in Bond.
4. If it can be reinvested in another property to avoid LTCG, what is the period allowed and whether the amount during that period/period of construction of the property to be purchased can be kept in SB or need to be kept separately in a special account and if so by what time from the date of sale?
1. Can I avoid the LTCG by investing in another flat?
2. If I have to invest in Bonds, I understand that it has to be done within 6 months. This period would be reckoned from the date of registration when the final amount is paid or from the date of sale agreement when a token amopunt is paid?
3. Can the amount be kept in one's normal S.B. account during the 6 month period or till is invested in Bond.
4. If it can be reinvested in another property to avoid LTCG, what is the period allowed and whether the amount during that period/period of construction of the property to be purchased can be kept in SB or need to be kept separately in a special account and if so by what time from the date of sale?
Author:
Aditi
Nov 19, 2009
Nov 19, 2009
Withdrawal of exemption under section 54F
"The new house that is purchased has to be held for at least 3 years from the date of purchase, or from the date of completion of its construction."
Please clarify whether the date of purchase is the date of payment, date of possession or date of registration?
Please clarify whether the date of purchase is the date of payment, date of possession or date of registration?
Re: LTCG
Hi Kannan,
1. Yes
2. From the date of sale agreement
3. Yes
4. The investment has to be made upto 1 year before the sale of the house, or within 2 years after the sale of the house. You would need to keep it in an Escrow account.
1. Yes
2. From the date of sale agreement
3. Yes
4. The investment has to be made upto 1 year before the sale of the house, or within 2 years after the sale of the house. You would need to keep it in an Escrow account.
Re: Withdrawal of exemption under section 54F
Hi Aditi,
This has always been a bone of contention, with lot of litigation. The answer depends on many factors, but as a general rule, it is the date of the agreement.
This has always been a bone of contention, with lot of litigation. The answer depends on many factors, but as a general rule, it is the date of the agreement.
Re: Withdrawal of exemption under section 54F
Hi Aditi,
This has always been a bone of contention, with lot of litigation. The answer depends on many factors, but as a general rule, it is the date of the agreement.
This has always been a bone of contention, with lot of litigation. The answer depends on many factors, but as a general rule, it is the date of the agreement.
Author:
Oscar D'Souza
Dec 20, 2009
Dec 20, 2009
Investent of LTCG in Joint property
My dad has sold a house for Rs 60 lakhs He had purchased the house for Rs 26000 in 1973 Even though we have made a lot of improvements and repairs in the house over the years we do not have any receipts Now We have found a house of around Rs 80 L Howevr I was pllaning to invest only the LTCG portion from my dads house sale and fund the remaining amount as a loan on my name For this I will have to register the house in my name along with my Dads My queries are 1) what would be the cost inflation index for 1973 and 2009 ( i couldnt find the same anywhere) 2) what is the LTCG payable 3) Can we claim some nominal amount as improvement amount and use it to calculate cost of property to reduce the LTCG 4) Will the joint property in my dad's and my name be eligible to save on LTCG tax do u foresee any problem in structuring the home deal in that way Thanks in advance for your response
Author:
Ramakrishna
Jan 03, 2010
Jan 03, 2010
How to avoid LTCG from income received by sale of Residential Land
Dear Sir,
At the outset, let ,me congratulate you for the useful articles as well as personalised replies to queries.
I understand, that in my case since the amount received is from sale of residential land, I have no option except to pay theTax on the Capital Gained.
Is my understanding correct, Sir?
At the outset, let ,me congratulate you for the useful articles as well as personalised replies to queries.
I understand, that in my case since the amount received is from sale of residential land, I have no option except to pay theTax on the Capital Gained.
Is my understanding correct, Sir?
Author:
chintan
Jan 07, 2010
Jan 07, 2010
section 54
Sir
If I own 2 flats - flat A currently occupied by me and flat B though not occupied by me but is offered to tax under income from HP (notional value).
Now if I purchase a flat C and then subsequently sell flat B (within 1 year of purchase of flat C), can I claim exemption of LTCG on sale of flat B towards the amount invested in flat C under Section 54? Is there any precendence/case laws to this.
Is there any other way I can save LTCG on sale of flat B?
Thank you in advance.
Regards
chintan
If I own 2 flats - flat A currently occupied by me and flat B though not occupied by me but is offered to tax under income from HP (notional value).
Now if I purchase a flat C and then subsequently sell flat B (within 1 year of purchase of flat C), can I claim exemption of LTCG on sale of flat B towards the amount invested in flat C under Section 54? Is there any precendence/case laws to this.
Is there any other way I can save LTCG on sale of flat B?
Thank you in advance.
Regards
chintan
Author:
Hrishikesh
Jan 11, 2010
Jan 11, 2010
Furniture expense used for LTCG Exemption
Hi,
I purchased a flat in Dec 2004 for 7.5 lacs and sold it in Dec 2009 for 22.5 lacs. I am in process of purchasing a new flat to invest the funds for LTCG exemption.
My question is "Whether the furniture and interior expenses that I am going to incur in my new flat be used for LTCG exemption?"
Appreciate your help and thank you for your comments.
Hrishikesh
I purchased a flat in Dec 2004 for 7.5 lacs and sold it in Dec 2009 for 22.5 lacs. I am in process of purchasing a new flat to invest the funds for LTCG exemption.
My question is "Whether the furniture and interior expenses that I am going to incur in my new flat be used for LTCG exemption?"
Appreciate your help and thank you for your comments.
Hrishikesh
Author:
lux
Feb 05, 2010
Feb 05, 2010
LTCG house sale
I purchased a flat in 1995-96 for 3.5 lakhs and sold it in 2009-10 for 12.5 lacs, purchase another flat in 2008-09 for 25 lakhs and sold it in 2009-10 for 32 lakhs and purchased another in 2009-10 for 37 lakhs. I understand this will attract LTCG & STCG. I need to know whether I can minimise my tax liability ? how ?
Author:
AMIT
Feb 16, 2010
Feb 16, 2010
exemption of LTCG
Hi, My mother had purchased house for 2 lacs in 1991 and has now sold house to my younger brother in 2010. Out of the sale proceed she is investing 19lacs in my new house for which I am joint owner with my mother and also taking home loan in which my mother shall be co borrower. Please advice if my mother can claim capital gain exemption for sale of new house to the extent of amount invested by her in new house? Also does she needs to be first owner in my new property with me becoming second owner ? Please revert urgently. Thanks
Author:
Dhruv Rawat
Feb 27, 2010
Feb 27, 2010
Exemption of LTCG
I would like to know if one can buy 2 houses from the LTCG on sale of one house.?
Long Term Capital Gain Saving
Hi Raag,
Thanks for this really informative site. I am learning a lot from the articles here. You are doing a fantastic service to society, by providing information to those seeking it. I absolutely love your website.
I have a query, and would appreciate your advice.
I own a house A possession of which I got in Mar 2006. Subsequently I bought house B from a builder which was to be delivered in June 10. I had taken a loan for house B and am still paying the EMI's.
I am planning to sell house A and to invest into house C with a builder doing new construction, the idea being to get a bigger house. House C's final possession would happen after 3 years. Clearly, I cannot use house C for the purposes of saving Long Term Capital gains on house A. House B whose possession will happen in the same financial year as the proposed sale of house A, seems a good candidate to balance off the LTCG of house A. I believe it does not matter that I have paid the amount of house B via loan, as house C does not actually have to be bought out of exactly the same money as the sale of house A as long as the conditions of Sec 54 are met. (namely the time frame of 2 years to purchase next property and the new property cannot be sold for 3 years)
I would still be left with a minor LTCG of about 1.5 lakhs, which I intend to pay. Everything is fine till here.
The builder of house B is running late and is planning to give a late delivery in Dec 10. I am worried if he delays the delivery further and Mar 11 is also crossed, then what would I do. I have a few scenarios.
1. Open a CG account with a bank. - Normally in such cases Income tax laws advise opening a Capital Gain Deposit account with the CG of house A that you plan to invest and one can use the amount for making further payments of the house. I cannot do this as I would have paid more than half the amount of the proceeds towards house C. Hence not enough money to put in this account. And anyway, this money will be going to house C and not house B payments, so it would be difficult to show that the payments are being made for the said purpose of investment. So this option does not serve my purpose.
2. Pay Income Tax of the LTCG and forget about taking benefit.
Here too there are 2 scenarios
a. Pay Tax in Mar 11, when its clear that possession of house B would not be happening in the financial year. In this case I would have to pay tax + penalty in terms of intrest on late payment of advance tax. which one has to pay on 15th Sep 10, 15 Dec 10 and 15 Mar 11.
b. Pay tax on 15th Sep and 15th Dec 10 in anticipation of the case that the builder does a late delivery. In this case I save on paying penalty later on in Mar 11. And in case I get the possession on time then I can claim the same and request the excess Tax as a refund.
Which of these two options 2a or 2b would you advise. Or do you have some other advice on this whole situation. I would be really grateful for your advice.
Thanks
Thanks for this really informative site. I am learning a lot from the articles here. You are doing a fantastic service to society, by providing information to those seeking it. I absolutely love your website.
I have a query, and would appreciate your advice.
I own a house A possession of which I got in Mar 2006. Subsequently I bought house B from a builder which was to be delivered in June 10. I had taken a loan for house B and am still paying the EMI's.
I am planning to sell house A and to invest into house C with a builder doing new construction, the idea being to get a bigger house. House C's final possession would happen after 3 years. Clearly, I cannot use house C for the purposes of saving Long Term Capital gains on house A. House B whose possession will happen in the same financial year as the proposed sale of house A, seems a good candidate to balance off the LTCG of house A. I believe it does not matter that I have paid the amount of house B via loan, as house C does not actually have to be bought out of exactly the same money as the sale of house A as long as the conditions of Sec 54 are met. (namely the time frame of 2 years to purchase next property and the new property cannot be sold for 3 years)
I would still be left with a minor LTCG of about 1.5 lakhs, which I intend to pay. Everything is fine till here.
The builder of house B is running late and is planning to give a late delivery in Dec 10. I am worried if he delays the delivery further and Mar 11 is also crossed, then what would I do. I have a few scenarios.
1. Open a CG account with a bank. - Normally in such cases Income tax laws advise opening a Capital Gain Deposit account with the CG of house A that you plan to invest and one can use the amount for making further payments of the house. I cannot do this as I would have paid more than half the amount of the proceeds towards house C. Hence not enough money to put in this account. And anyway, this money will be going to house C and not house B payments, so it would be difficult to show that the payments are being made for the said purpose of investment. So this option does not serve my purpose.
2. Pay Income Tax of the LTCG and forget about taking benefit.
Here too there are 2 scenarios
a. Pay Tax in Mar 11, when its clear that possession of house B would not be happening in the financial year. In this case I would have to pay tax + penalty in terms of intrest on late payment of advance tax. which one has to pay on 15th Sep 10, 15 Dec 10 and 15 Mar 11.
b. Pay tax on 15th Sep and 15th Dec 10 in anticipation of the case that the builder does a late delivery. In this case I save on paying penalty later on in Mar 11. And in case I get the possession on time then I can claim the same and request the excess Tax as a refund.
Which of these two options 2a or 2b would you advise. Or do you have some other advice on this whole situation. I would be really grateful for your advice.
Thanks
Author:
D M Chinnappan
Mar 10, 2010
Mar 10, 2010
LTCG
Dear sir,
your answers on this topic are very informative and simple.Thanks for the service.
I have two simple questions on this.
To save tax on LTCG two options were given.
1. inverst in a house the full amount of the capital gain.
please clarify that the full maount is to be invested in ONE RESIDENTIAL PROPERTY OR MORE THAN ONE RESIDENTIAL PROPERTY as we find different answers are given for this. Pl update me with latest position
2. invest the entire amount in sec 54 bonds.
please clarify whether these bonds locked in for 5 years? or it is locked in for 3 years with 5 year tenure?
On the date of maturity say after 5 years, only the interest is taxable or the PRINCIPLE IS ALSO TAXABLE? If the principal is not taxable can we use the funds as we desire upon maturity?
3. You have clearly mentioned that only LTCG is taxable and not the entire sale proceeds. If so the balance of sale proceeds can be used as we desire? R we right?
Pl clarify.
Thanks
your answers on this topic are very informative and simple.Thanks for the service.
I have two simple questions on this.
To save tax on LTCG two options were given.
1. inverst in a house the full amount of the capital gain.
please clarify that the full maount is to be invested in ONE RESIDENTIAL PROPERTY OR MORE THAN ONE RESIDENTIAL PROPERTY as we find different answers are given for this. Pl update me with latest position
2. invest the entire amount in sec 54 bonds.
please clarify whether these bonds locked in for 5 years? or it is locked in for 3 years with 5 year tenure?
On the date of maturity say after 5 years, only the interest is taxable or the PRINCIPLE IS ALSO TAXABLE? If the principal is not taxable can we use the funds as we desire upon maturity?
3. You have clearly mentioned that only LTCG is taxable and not the entire sale proceeds. If so the balance of sale proceeds can be used as we desire? R we right?
Pl clarify.
Thanks
Author:
Jay
Mar 10, 2010
Mar 10, 2010
LTCG 36 months
This is very useful site...I really appreicate you bringing so much clarity on LTCG and other taxation related issues. I have a very small question.
I bought an apartment in Bangalore in September 2004 with promise to get the apartment in January 2006 but thanks to the builder inefficiencies the construction only got completed in January 2007. On top of it because of some personal problems I could register the apartment only on March 27, 2007.
Now I want to sell this apartment and invest that money into buying a villa. However, I want to avoid LTCG entirely so the question is...considering that I got the apartment registered only on March 27, 2007 what is the earliest date I take for registering the apartment in NEW owners name?
Should I complete the registration only in April 2010 to safely state that 36 months were completed or can I go ahead and register the apartment in NEW owners name on 28-30 March 2010 timeframe?
Regards,
Jay
I bought an apartment in Bangalore in September 2004 with promise to get the apartment in January 2006 but thanks to the builder inefficiencies the construction only got completed in January 2007. On top of it because of some personal problems I could register the apartment only on March 27, 2007.
Now I want to sell this apartment and invest that money into buying a villa. However, I want to avoid LTCG entirely so the question is...considering that I got the apartment registered only on March 27, 2007 what is the earliest date I take for registering the apartment in NEW owners name?
Should I complete the registration only in April 2010 to safely state that 36 months were completed or can I go ahead and register the apartment in NEW owners name on 28-30 March 2010 timeframe?
Regards,
Jay
Author:
Pranav
Mar 18, 2010
Mar 18, 2010
property in 1973 sold in 2010
Firstly let me say this site is very informative and has helped me to understand a lot.
Q.my mother had purchased a flat for 37000 in 1973 now we have sold it in 2010 for 45L, how can we calculate since calue in table is only till 1981 all places and no site has property valuation i the year of 1973. can you please advise.
thanks in advance.
Q.my mother had purchased a flat for 37000 in 1973 now we have sold it in 2010 for 45L, how can we calculate since calue in table is only till 1981 all places and no site has property valuation i the year of 1973. can you please advise.
thanks in advance.
Author:
Kamesh
Mar 22, 2010
Mar 22, 2010
LTCG - purchase of apartment under-construction
Dear Sir
Kudos to you for explaining tax code on several key topics in simple english to common man.
I have purchased a flat in Aug 2006 and sold it in Jan 2010. Capital gain is in the tune of 40L
I want to invest the capital gain into a newly launched scheme.
Builder is proposing registration of the apartment at the time of booking.
I will be paying the full cost of apartment which is about 85L and register the flat in my name by end of April 2010.
1) Please confirm my understanding that I need not pay any tax on 40L capital gains
2) Given that I have sold the flat in Jan 2010 and investing the capital gain after March 2010, do I have reflect the capital gain in the tax filing for the FY ending March 31 2010?
Many thanks for your time
Kamesh
Kudos to you for explaining tax code on several key topics in simple english to common man.
I have purchased a flat in Aug 2006 and sold it in Jan 2010. Capital gain is in the tune of 40L
I want to invest the capital gain into a newly launched scheme.
Builder is proposing registration of the apartment at the time of booking.
I will be paying the full cost of apartment which is about 85L and register the flat in my name by end of April 2010.
1) Please confirm my understanding that I need not pay any tax on 40L capital gains
2) Given that I have sold the flat in Jan 2010 and investing the capital gain after March 2010, do I have reflect the capital gain in the tax filing for the FY ending March 31 2010?
Many thanks for your time
Kamesh
Author:
Abhijit
Apr 05, 2010
Apr 05, 2010
Keep up the good work
This is a great site. I am not aware of any Govt of India website documenting tax laws. So in the absence of such a site, your site is really great ! Thanks.
LTCG
Hi Sir,
Please suggest a best option to save tax in the below scenario;
Cost of old flat 1,099,520
Sold the old flat 4,000,000 in Dec 2009
Bought the new flat 7,835,100 in Jan 2010
Home Loan taken 6,500,000
Invested in new flat 1,335,100
I have done the calculation and the Taxable amount comes to Rs. 1,110,321 if the home loan which i have taken on the new property is not considered as amount invested.
I am open to buying one more residential property if that can save me from LTCG. Will prepayment of home loan of the same taxable amount help?
Thanks a ton.
Please suggest a best option to save tax in the below scenario;
Cost of old flat 1,099,520
Sold the old flat 4,000,000 in Dec 2009
Bought the new flat 7,835,100 in Jan 2010
Home Loan taken 6,500,000
Invested in new flat 1,335,100
I have done the calculation and the Taxable amount comes to Rs. 1,110,321 if the home loan which i have taken on the new property is not considered as amount invested.
I am open to buying one more residential property if that can save me from LTCG. Will prepayment of home loan of the same taxable amount help?
Thanks a ton.
Author:
Malavika
Apr 18, 2010
Apr 18, 2010
Is LTCG Exemption available on Sale of Land to buy 2 Apartments
In your replies 2 different queries you have contradicted yourself w.r.t. whether LTCG Exemption is available on Sale of House to buy 2 Houses. To Arpita above you have concluded, "The number of houses is not relevant - you can invest in 2 houses." To Biten you have said, "Yes, it is necessary to invest the capital gain in only 1 house. So, you would not be able to buy 2 flats and claim the tax benefit - you would need to invest in a single property."
Therefore I am confused.
I am selling my land & will have enough money to invest in 2 apartments. But what is the final word on this issue? Can I avail of LTCG Exemption on both properties?
Therefore I am confused.
I am selling my land & will have enough money to invest in 2 apartments. But what is the final word on this issue? Can I avail of LTCG Exemption on both properties?
Author:
Vishal Chaddha
Apr 28, 2010
Apr 28, 2010
Need confirmation - Urgent
Though you have already mentioned "This range is: Upto 1 year before the sale of the house, or within 2 years after the sale of the house.", I still wanted to confirm that the same rule apply as per current laws. I am planning to buy a flat in Jun 2010 and have put up a plot of land for sale. I am expecting that the plot of land will a take few months to sell. I conclude from your article that I have 1 year from the date of purchase of the flat to sell the land. Please correct me if I am wrong.
Thanks
Vishal
Thanks
Vishal
Author:
LUIS D'CRUZ
May 03, 2010
May 03, 2010
Time limit for sale of a flat after purchase of another flat.
I have purchase a flat in May 1995. I have purchased another flat in December 2009. I am inclined to sell my former flat. Within what period of purchase of the second flat can I sell my first flat to adjust the sale proceeds against the purchase
cost of the latter flat?
Your reply will be appreciated.
cost of the latter flat?
Your reply will be appreciated.
Author:
Parmod
May 05, 2010
May 05, 2010
LTCG
What are the provisions if residential plot is sold and there is LTCG. Whether investing the cap;ital gain with public sector bank in capital gain deposit account is eligible for claiming exemption from capital gain in such case.
Author:
RAMANATH
May 13, 2010
May 13, 2010
CAPITAL GAINS
I ( My name only ) purchased Residential property in 1989 – 90 for Rs 80000. On 7th April 2010 , I sold the property for 75 Lakhs .
On 06th May 2010 , I inevsted Rs 50 Lakhs ( Rs 25 Lakhs in REC and Rs 25 Lakhs in NHAI Capital Gains Bonds )
Now , I am left with Rs 25 Lakhs
Currently myself & mywife jointly owns a Flat , which was purchased in 2001 at Rs 9 Lakhs
Can I invest the Balance Rs 25 Lakhs in SBI Capital Gains Account and Can I purchase within 3 years , one more property in my name or jointly with my wife ?? , does this help me in not paying Capital Gains for Rs 25 Lakhs ??
Is there any legal way to save Capital Gains Tax, please advise
On 06th May 2010 , I inevsted Rs 50 Lakhs ( Rs 25 Lakhs in REC and Rs 25 Lakhs in NHAI Capital Gains Bonds )
Now , I am left with Rs 25 Lakhs
Currently myself & mywife jointly owns a Flat , which was purchased in 2001 at Rs 9 Lakhs
Can I invest the Balance Rs 25 Lakhs in SBI Capital Gains Account and Can I purchase within 3 years , one more property in my name or jointly with my wife ?? , does this help me in not paying Capital Gains for Rs 25 Lakhs ??
Is there any legal way to save Capital Gains Tax, please advise
Author:
T.V.Padmanabhan
May 15, 2010
May 15, 2010
Transfer of funds from Capital Gains Bank Account to buy Bonds
We have parked some funds in capital gains bank account of a nationalised bank for long term capital gain. We were planning to buy a flat. Now we have given up the idea. It is only 4 months now since we sold our flat. Can we get the same invested in National Highways Bonds under 54 EC
Thank you
Thank you
Author:
sam
Jun 13, 2010
Jun 13, 2010
capital gain tax on sale of an open land
hello sir,
- i want to know that can i purchase a residential house by selling an open land and can also buy agriculture land frm this money and if nt then wat r the other ways to save the capital gain aprt frm bonds??
- i want to know that can i purchase a residential house by selling an open land and can also buy agriculture land frm this money and if nt then wat r the other ways to save the capital gain aprt frm bonds??
Author:
shabeer
Jun 30, 2010
Jun 30, 2010
LTCG exemption
Hi,
Thanks for the excellent website.
I sold an inherited property recently and I want to invest the amount in multiple properties in order to save LTCG tax. I wanted to know if for example my LTCG is 50Lakhs, and I plan on buying two residential properties (flats/constructed house) say each of 25Lakhs, can I get tax excemption by combining both assests or does the income tax rule specifically state that only one property (say the first of two - 25L) can be used for claiming tax exemption and for the second property invested (25L) do I have to pay a long term capital gain?
Thanks for the help.
Thanks for the excellent website.
I sold an inherited property recently and I want to invest the amount in multiple properties in order to save LTCG tax. I wanted to know if for example my LTCG is 50Lakhs, and I plan on buying two residential properties (flats/constructed house) say each of 25Lakhs, can I get tax excemption by combining both assests or does the income tax rule specifically state that only one property (say the first of two - 25L) can be used for claiming tax exemption and for the second property invested (25L) do I have to pay a long term capital gain?
Thanks for the help.
Author:
Ajay
Jul 09, 2010
Jul 09, 2010
LTCG Calculation
Hi,
I have bought Flat for 17 lacs in March 2006 & sold it in Jan 2010 for 22 lacs.
Further i have used the sale proceeds to buy a plot for 21 lacs in Jun 2010.
Is there any Income tax liablity as far as LTCG is concerned as i have invested in another property within 6 months. If yes, please let me know how much.
Thanks alot in advance.
I have bought Flat for 17 lacs in March 2006 & sold it in Jan 2010 for 22 lacs.
Further i have used the sale proceeds to buy a plot for 21 lacs in Jun 2010.
Is there any Income tax liablity as far as LTCG is concerned as i have invested in another property within 6 months. If yes, please let me know how much.
Thanks alot in advance.
Author:
Pinaki Das
Jul 27, 2010
Jul 27, 2010
Whether New Residential Prop should be in the name of Seller
Dear Sir,
Hearty Congratulations for maintaining this wonderful knowledge portal.
Brief Facts : My grandfather made one house in 1920. He has 6 sons. Now we are selling the house. Consideration to be received by my father is Rs. 60 Lacs (for 1/6 th share). My father has 2 sons and 1 daughter. Now my query is :
1. From the sale consideration of Rs 60 Lacs can we deduct 1/6 share of cost of property and improvement?
2. Instead of taking Cost of property at 1920 whether i can take Fair Market Value as on 01.04.1981. In this regard whether any certificate from any valuer will be sufficient.
3. If my father distribute Rs. 60 Lacs among us ie Rs 20 Lacs each, whether we can buy one house each (ie total 3 houses) and claim Tax Exemption u/s 54
4. Whether the new house has to be in the name of my father?
Hearty Congratulations for maintaining this wonderful knowledge portal.
Brief Facts : My grandfather made one house in 1920. He has 6 sons. Now we are selling the house. Consideration to be received by my father is Rs. 60 Lacs (for 1/6 th share). My father has 2 sons and 1 daughter. Now my query is :
1. From the sale consideration of Rs 60 Lacs can we deduct 1/6 share of cost of property and improvement?
2. Instead of taking Cost of property at 1920 whether i can take Fair Market Value as on 01.04.1981. In this regard whether any certificate from any valuer will be sufficient.
3. If my father distribute Rs. 60 Lacs among us ie Rs 20 Lacs each, whether we can buy one house each (ie total 3 houses) and claim Tax Exemption u/s 54
4. Whether the new house has to be in the name of my father?
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