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How to save / avoid Long Term Capital Gain (LTCG) Tax on Sale of a House

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.

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.


2. Invest in Another House – Section 54 (Sec 54 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 another house.

You can save the LTCG by investing in a house even if you own other house(s).


How Much is Exempt

The amount of LTCG exempt from income tax is equal to the amount invested in the new house.

You can save the entire income tax on the LTCG from the sale of a house, if the entire long term capital gain is invested in another house.

Again, please note that you have to consider the amount of the long term capital gain, and not the entire sale proceeds.

Taking the same example as in the previous section, say 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 a new house, you would not pay any income tax on this gain!

Instead, if you invest only, say, Rs. 7 Lakhs in a new house, you would have to pay a long term capital gain tax on the remaining LTCG of Rs. 3 Lakhs.

Thus, you would pay 20% of Rs. 3 Lakhs = Rs. 60,000 as long term capital gains tax.


When to Invest

The investment in a new house has to be made within a range in order to claim exemption (or relief) under section 54EC.

This range is: Upto 1 year before the sale of the house, or within 2 years after the sale of the house.

If the new house is being constructed (and not bought), such construction should be finished within 3 years of the sale of your house.


Capital Gains Scheme of Deposit Account (CGSDA) (Also sometimes known as Escrow Account)

If your intention is 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. That is, the amount deposited in this account is treated as if you have invested it to buy another house.

The CGSDA can be opened in any branch of a public sector bank.

The amount deposited in a CGSDA has to be utilized for buying a new house within 3 years. If a new house is not purchased within 3 years using this amount, the entire amount is treated as long term capital gain for the previous year.

If only a portion of the amount is spent in purchasing a new house, the remaining amount is treated as long term capital gain for the previous year.


Period of Holding for the NEW House

There is one more condition for saving the income tax under section 54: 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.

This clause is very important, because if you do not follow this, you would undo all the benefit that you received through section 54.

What happens if this condition of holding the new house for 3 years is not satisfied?

When you sell this new house, while calculating the capital gain on its sale, the cost of this house will be reduced by the amount of long term capital gain (LTCG) that you invested in this house.

That is, the cost of this house will be reduced by the amount you claimed as exempt from tax when you purchased this house.

This effectively ends up increasing the profit that you show on the sale of this new house, and therefore, end up paying a lot more income tax than you should.

Let’s continue our example to understand this better.

You sell your house (House A) for Rs. 15 Lakhs, and your long term capital gain from this sale is Rs. 10 Lakhs.

You buy a new house (House B) for Rs. 20 Lakhs, and invest your gain of Rs. 10 Lakhs in it. You claim this investment of Rs. 10 Lakhs u/s 54, and therefore, you don’t pay any income tax on this gain.

Now, if you sell House B after 3 years for, say Rs. 25 Lakhs, your gain is Rs. 25 Lakhs – Rs. 20 Lakhs = Rs. 5 Lakhs, and you pay income tax on this (I haven’t factored in indexation just for simplicity – in an actual calculation, the cost of purchase should be indexed).

But if you sell House B before 3 years, for, say Rs. 25 Lakhs, your gain is:

Rs. 25 Lakhs – (Rs. 20 Lakhs – Rs. 10 Lakhs) = Rs. 15 Lakhs

And you pay income tax on Rs. 15 Lakhs!

(Here, we reduced the amount claimed by you as section 54 exemption from the cost price of the house).

Please also read:

- “Long Term and Short Term Capital Gain – Income Tax Calculation

- “Long Term Capital Gains (LTCG) on Sale of a House – Calculation and Income Tax

- “Set Off and Carry Forward of Losses – Capital Gains and House Property

Related Articles:

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  1. 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

  2. Anonymous says:

    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

  3. Anonymous says:

    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.

  4. 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.

  5. 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.

    • Hi Arpita/all,
      I want answer for the question “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.” Please help.

    • Hi Arpita/all,
      I want answer for the question
      “I want to sell 1 house and with the long term gain I want to buy 2 or more 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.” Please help.

      • we are staying in the parents flat, now we want sell this flat and take three flats and stay seprately in our own flats as our parents are dead. In this case we can get the benefit of long term capital gain tax? Parents had brought the flat 35yrs before . in mumbai .


  6. 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.

  7. [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, which option should be chosen.

  8. 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 ?


  9. 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.

  10. Hi Nitin,

    Income tax on LTCG from sale of land can not be saved by investing it in another house.

  11. 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.

  12. 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?

  13. Anonymous says:

    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.

  14. Anonymous says:

    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.

  15. 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?


  16. 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?

  17. Hi Venkat,

    In my opinion, the list remains the same even after the budget.

  18. 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).

  19. 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?


  20. Anonymous says:

    Hi Venkat,

    No, as of now, there is no article like that. But it is a good idea for an article – thanks!

  21. Anonymous says:

    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.

  22. 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

  23. 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.

  24. Biten Kathrani says:

    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.


  25. 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.

  26. 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.

  27. 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.

  28. 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.

  29. 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?


  30. 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.

  31. Sir,when I WAS student of 22yr old my parent purchase a residensial land on my my yr. income is 1.5 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.

  32. 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

  33. 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.

  34. 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.

  35. entire sale proceed means total sale amount? can some amount from this i can utilised on construction / furnishing?

  36. Kiran Parmar says:

    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.

  37. sandeep arora says:

    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 ?

  38. 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.

  39. 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.

  40. Hi Kiran,

    You can not save capital gain tax by housng loan repayment (from the gain or otherwise).

  41. Anonymous says:

    Hi Jaynath,

    Thanks a lot for the encouragement and the patronage…. I am really glad that I am being of help.

  42. Jayanth says:

    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

  43. Anonymous says:

    Hi Jayanth,

    You would need to invest Rs. 2 Lakhs.

  44. Jaynath says:

    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.


  45. Anonymous says:

    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.

  46. Anonymous says:

    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.

  47. Anonymous says:

    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.

  48. 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

  49. 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.

  50. Anonymous says:

    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.

  51. Anonymous says:

    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.

  52. 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?

  53. Parag Tilwankar says:

    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

  54. sandeep arora says:

    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.

  55. Anonymous says:

    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.

  56. 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,

  57. Anonymous says:

    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.

  58. Anonymous says:

    Hi Sandeep,

    You only need to deposit the LTCG amount, not the entire sale proceed.

  59. Anonymous says:

    Hi Sandeep,

    In this case, the period would start from the time of getting possession.

  60. sandeep arora says:

    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.


  61. 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.


  62. Anonymous says:

    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!

  63. Saurabh says:


    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

  64. Anonymous says:

    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!

  65. 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.


  66. Haripriya says:


    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?

  67. Anonymous says:

    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.

  68. Anonymous says:

    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.

  69. 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 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

  70. Anonymous says:

    Hi Pavan,

    Yes, you can. Make sure that the construction is completed in the stipulated time period.

  71. thanx for your answer,can u tell me any decided case law or any refrence to support the answer.

  72. Anonymous says:

    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.

  73. 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.


  74. Anonymous says:

    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.

  75. Anonymous says:

    Hi Arpit,

    The investment has to be in a new house. Construction of a floor for an existing house would not qualify.

  76. Anonymous says:


    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

  77. Anonymous says:

    Hello raag,

    the link for the second page is a dead link…


  78. Anonymous says:

    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)

  79. Anonymous says:

    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).

  80. Anonymous says:

    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

  81. Anonymous says:

    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.

  82. Anonymous says:

    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.

    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?

  83. 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?


  84. Anonymous says:

    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.

  85. Anonymous says:

    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.

  86. Anonymous says:

    Hi Mohan,

    The link has been corrected. Thanks for pointing out!

  87. Anonymous says:

    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.

  88. Anonymous says:

    Hi TooCool,

    Yes, this should be possible.

  89. 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.

  90. Anonymous says:

    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

  91. Mallikarjun says:

    I have 2 properties flat with no home loan at present. i am paying income tax on another home showing 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?

  92. Anonymous says:

    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.

  93. toocool says:

    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.

  94. Anonymous says:

    Hi Vishal,

    You would not be able to avoid tax on LTCG if you use the LTCG amount to repay your home loan.

  95. Anonymous says:

    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.

  96. Vishal Jain says:

    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

  97. 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.

  98. 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.

  99. Ajantha G says:

    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.

  100. 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.

  101. 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.

  102. 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?

  103. “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?

  104. 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.

  105. 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.

  106. 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.

  107. 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.



  108. Oscar D'Souza says:

    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

  109. 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.

  110. Ramakrishna says:

    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?

  111. Hrishikesh says:


    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.


  112. 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?

  113. 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

  114. 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.

  115. Anonymous says:

    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.

  116. Firstly let me say this site is very informative and has helped me to understand a lot. 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.

  117. 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??

  118. 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?


  119. D M Chinnappan says:

    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.


  120. Anonymous says:

    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.


  121. 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 ?

  122. 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

  123. Dhruv Rawat says:

    I would like to know if one can buy 2 houses from the LTCG on sale of one house.?

  124. T.V.Padmanabhan says:

    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

  125. RAMANATH says:

    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

  126. Vishal Chaddha says:

    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.

  127. shabeer says:


    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.

  128. LUIS D'CRUZ says:

    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.

  129. 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.

  130. Anonymous says:


    I found this site extremely useful, particularly the simple way most queries have been explained by you….. and trust me these things are very difficult to understand!!

    I have a question.

    I had bought a flat in Dec’2005 and have sold the same in Aug’2010. I had taken a loan of 615334/- for buying the flat and after selling the same, got about 1250000/-. Of this 1250000/-, i paid about 5.96 Lakhs towards settling my home loan from the bank and invested the balance towards payments for a new flat i booked (the possession is only in Nov’2012 although the sale agreement is already done). The property is under construction.

    Need your advice on whether LTCG Tax will apply here or will be exempt? If it applies, how much will apply?

    Thanks in advance….

  131. Pinaki Das says:

    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?

  132. mahesh thakker says:

    can i purchase 2 houses with my long term capital gain money{which i am going to get after selling my present residential flat} at different location and different municipality?
    mahesh thakker

  133. Yr of Purchase of flat – 2001-02 (Aug-2001)
    Purchasing cost – 4.27Lacks
    Yr of Sale of Flat-2010-11 (Aug-2010)
    Selling cost – 13.75Lacks

    What is the minimum amount of capital gain tax in this case?
    When should I pay the LTCG? (immediately or before 31st July?)
    Is it possible to pay partial income tax & partial investment in bonds?
    Can I pay the tax in two diff Financial years 2011-12 & 2012-13?

  134. Sridhar Rao says:

    a 2 year old industrial land in the name of my private ltd company in bangalore is sold and my LTCG is 40 lakhs. my queries are
    A) can i purchase any kind of land anywhere in india to save ltcg.

    b) As per your views i have 6 months time to invest in bonds to save ltcg, can i invest the money for that grace six month period in fixed deposit or mutual funds or any other fund

    c) i have already a house in my name can i invest the the amount to save ltcg from the proceeds of industrial land to buy a house

  135. Dear Sir,

    Should I get tax exemption from sale of 1st property (SHORT TERM)by investing the amount in another property(i.e. short term capital gain)?

  136. Dear Sir,

    Should I get tax exemption from sale of 1st property (SHORT TERM)by investing the amount in another property(i.e. short term capital gain)?

  137. Dear sir,
    i have purchased a commercial property in 1980 at rs.75000,now i m selling it at rs.5cr . what are the possibility of saving tax. Can i buy 1 or 2 residencial property or commercial property or invest in the bonds mention above to save tax? plz help.

  138. Sir
    In our family partition, I recdived my share in residential house (hereditary property which was divided among the legal heirs) by way of cash. What is the treatment for this amount ? Whether capital gains tax is payable ? IF so, how to legally avoid ?

  139. Umesh Kumar says:

    I have purchased a house in 2007-08 in Rs.15,00,000.00 and spent Rs.88,500.00 in regisrty. I have sold this house in 2010-11 in Rs.30 Lakhs. What wouls be my LTCG.

    It is informed that I have purchased another house in April,2010 at Rs.41.00 Lakhs (Rs.9.00 Lakhs borrowed from my company and paid the balance from my savings). Please consider this fact while evaluating LTCG.

    Umesh Kumar

  140. if i sell my property today for 50L & gain a profit of 15L
    To avoid CGT i invest the entire 15L in bonds (REC/NHAI)
    what about the 35L left with me.
    Can i invest this elsewhere ?
    Thanks & Regards

  141. SIR


  142. Krishnakumar Desai says:

    As far as LTCG. Tax is concerned is there any differance in sale of a with house structure on it and residential plot without the house structure?
    I want to sell the house but if i remove the structure which will fetch me rs 2 to 3 lakhs.without making any sense to builder who will also remove the old structure
    I hope to get the capital gain of 2 crore out of which i intend to invest 50 lakhs each in REC and NHAI but in diferant financial year,
    one before march10 and another after april 10. Is it correct planning to save L CGT ?
    Another one crore i want to buy two residential property. Can I buy two as the 54E does not say one but merely used “a” asand adjective as it can not use “an” or “the” pease claryfy whether can I buy 2 houses to claim exemption?

  143. Anonymous says:

    It had been clarified that to save LTCG tax, a new house can be purchased or it can be invested in bonds etc.My query is can it be utilized for renovation of old house. Vasu

  144. Anonymous says:

    If a person sells off his existing house and his spouse sells off her plot of land (their individual properties) after three years of their purchase and then invest more than the sum total of their individual long term capital gains in a single property – A) in joint name B) in the name of any one of them, then would the long term capital gains tax exemption be available to both of them in both the cases A) & B) above. Kindly clarify.

    Best regards & thanks.

  145. Anonymous says:

    Dear Sir,
    I have sold my residential house by dividing into 2 parts and selling under 2 seperate sale agreements, duly registered by the relevant authority after payment of due stamp duty, to 2 seperate people at the same time.
    Out of the correctly computed LTCG, I wish to save the LTCG Tax by investing in 2 seperate residential properties to a value upto or just more than the LTCG as computed.
    Is it permitted as per IT Act? The confusion is because of the wording “a residential property”.
    Is my case different due to the fact that I have sold under 2 seperate sale agreements?
    Are there any other issues I have to keep in mind to save the LTCG Tax?
    A clarity from you will be extremely useful.
    Best Regards,
    Viresh Dayal

  146. We are coming to Pune and would like to consult with you re
    NRI property sale. Kindly let us know your rates.
    Thank You

  147. Should the three years be calculated from the date of registration or from the date of possession from the builder if it is a new independent house. Can it be sold within 3 years from the date of possession. If sold after the 3rd year, but another new property was booked before the sale of this property, can it be adjusted against the previous property’s proceeds.

  148. Hi Raga,
    Thanks for the excellent site. It is very useful.
    I have a query regarding Indexation start point from LTGT perspective.
    My father bought a house in 1989 (the owned gave him power of attorney) and we moved to the house the same year. However he got the property registered in his name only in 2004. He is now planing to sell this house. Can you please let me know as which year will be taken for the Indexation. Will it be 1989 or 2004?

  149. I have a old property in my name, I have a home loan currenltly active for 22 L . Now can the processed from the sale of my old slef owned proceeds be used to repay the Home loan. ( Income tax perspective in this regard. )

  150. Hi, this is helpful information. However, If i have 2 houses that I want to sell. Can I sell both houses and invest the CG to buy one new house. thanks.

  151. You have mentioned above that under construction house should be completed within 3 years after selling your house to save tax.

    My question is whether it is possible to first taken possession of under construction house and then sell your existing house within 1 year to save capital tax.

  152. Dear sir
    your website is excellent. I could get a wealth of info from your answers . may God bless you and you continue to share your wisdom with all our confused souls!

  153. hello sir
    i have brought a land 2 years back and i want sell it now whether i have to pay tax on the profit i get from that and how much i have to pay.

  154. on behalf of my mother i asking you that my mother had an agriculture land in coorg which she got from her grand parents now she has sold it for RS. 40,00000-/- what are all the thing she can do to avoid hefty tax.if she has to invest on another property eg. site or house. what is the maximum time that she can take to avoid tax. out 4000000 she will invest 500000 on alteration of present house that we are staying will there be exemption on these 500000 also or not.where can she invest other than property to avoid tax.can she keep the amount in some cooperative banks .please advise me what to do i will be waiting for your reply.find a solution immediately.

    Thank You

  155. Dear Raaj,
    I am an Indian resident and own a flat in Mumbai. I purchased this flat in 2002 and am planning to sell it now. On the otherhand, I am also going to settle in the UK from 2012 onwards. My question is: can I sell the house and buy the same in the UK and avoid paing LTCG tax? Is that possible for purchasing the house in another country?

    Will appreciate you feedback on this.

  156. Dear Sir, I sold my residential apartment on dated 4-10-2011, and calculated amount of my LTCG is 25.16 Lacs. I have deposited this amount on dated 21-10-2011 in the Bank under the LTCG scheme under section 54. I have booked one under construction house with a builder and entered into agreement on dated 20-8-2011. I have got specific allotment letter by the builder. I want to make payments on bi-monthly basis to the builder under Time Linked Plan. Builder has agreed to give me possession within three years. If I fail to utilize this amount before the end of three years, and say an amount of rupees 2 lacs is still left in my account with the Bank. My query is ” Am I required to pay LTCG tax on the unutilized amount of rupees 2 lacs or full amount of 25.16 lacs?

  157. Recently I sold my house with good long term capital gains. I have booked a flat 4 yrs back and it is still under construction. Possession of flat will be in mid 2012. DO I have to pay LTCG tax or can I show the LTCG invested in my already booked flat whose possession is in 2012?

  158. Sir
    My dad reicved a shop from my gradfather in 1984 and dad died in 2009 and after that shop was trasfered into my moms name and we sold in july 2011 and we recived 20.50 lkhs , we dont knw what is th index value and how much we have to invst in REC BONDS* but we have already invest 6 lkhs in bonds and we are also planning to buy a plot/land . that i will construct asap. how much time i will be having to consume the money and how much is the balance to consume it pls guide


  159. I had bought a house in 2000 for 10.00 lacs which includes modification post purchase and registration. Now I am selling this house at about 26 lacs and sale deed is planned for Jan 2012. Purchaser has paid me 60-70 percent amount over last 2 -3 months. My question is
    a) Is the interest earned on this amount in last 3-4 months taxable under LTCG or as normal interest
    b) I have recently booked a flat and paid first instalment and balance to be paid over a period of 2-3 yrs. The construction of the flat is not likely to be completed within 3 years of sale of my existing house

    Do I need to keep the LTCG amount in a special account ? Will I be eligible for tax relief under this case ?


  160. Raghavendra says:

    I bought a plot A in June 2007 in Bangalore for a sale consideration of Rs 2.4lakhs, but I’m selling it now in Dec 2011 for about 7.2lakhs. I also bought another plot B in October 2010 with a house loan of 40lakhs for 15years. I want to know if I can avoid LTCG by part-payment of my loan. Though I’ve been trying to sell the plot A since 6months I found a buyer now. I plan to build a house on plot B in the long run, but only after I repay the loan to a good extent.

  161. Dear Sir,
    1. My father purchased a flat in kanpur(up) in 1999 for Rs 14.5 Lacs.
    2. My father expired in 2007,leaving behind my mother ,younger sister and self.the flat was in my fathers name.
    3. We sold our house for Rs 20 lacs in 2011 and the buyer also took a loan for 15 LACS and paid 10 lacs to my mother and 5 lac each to me and my sister.(5+5+5 was given in cheque to all three of us and 5 to my mother through the buyers personal savings).
    4. My sis has transferred 5 lacs in my mothers a/c .and my mother has transferred 15 lacs in my a/c as we are purchasing a property worth 25 lacs in ghaziabad.I am pying the bal 5 lacs from my pers savings.
    5. my qus now is,that is it legally okay in terms of paying LTCG or being exempt from it as im planning to buy the new flat in my name .
    6. shall we go in for joint registration of the new flat or the money ie 10+5 (mothers and sisters share)can be shown as gift .or do i have to take a loan from my mother.
    7. I’m throughly confused and would really appreciate your help and advice on the subject.
    Thanking you in anticipation,

  162. shrenuj jain says:

    For eg. My LTCG is around 75 lacs. I invested 50 lac in my new house property and for balance 25 lacs, can I claim for tax exemption under sec- 54EC.
    Please let me know

  163. Baldev Singh says:

    My son sold a constructed house after02 years of its construction i.e. under STCG & i sold my commercial booth after 10 years under LTCG. Now we wants to purchase a new house but already having house in my name (LTCG).Please let me know whether we can purchase jointly or not to save capital gain tax

  164. Is reinvesting that money from sale of a flat to preclose another homeloan taxable ?
    To elaborate further :
    I have homeloan of 40L on a flat that i booked 3years back ( AOS signed 2years back ) .This flat is constructed and i would be moving in soon .
    Meanwhile i booked another flat last year which is also almost completed now. If sold this would would fetch close to 40L . Can i pre-close the the loan on the 1st flat by selling 2nd flat w/o paying any taxes ?

  165. My mother & I booked a flat in 2008. We took a loan to make partial payments on inital two installments for construction of this flat. We are expecting to get possesion of flat by Jan 2012. On July 2011 my father sold his 1st flat, brought in 2003, to pay for the new flat. My questions are:
    1. Since, we hav’nt got possesion of new flat yet. Can we save tax by paying for next installment, registration and other legal fees for possesion by Jan 2012 on new flat.
    2. Can my father save capital gains tax from sale of 2003 flat for the new flat in my mother’s & my name, or does his name also has to be on the ownership of new flat?
    3. Can we use capital gains to pay-off princiapl on loan that was taken for payment of new flat (Note- We hav’nt got possesion of new flat yet)
    Thank you for your help in advance..

  166. I have recently sold my flat and have a LTCG of 10lakh. If I buy a new house worth 10lakh, but pay say 2 lakhs from profit earned and take up a home loan for the rest 8 lakhs, will this save my capital gains…..
    Any help would be appreciated….
    Thanks and Regards

  167. Hi!
    This is a wonderful resource! has cleared a few doubts of mine. But i still have a query.
    My mother, a senior citizen now, bought a plot in 1984 for approx Rs 30000. the same was sold in 2007 for about Rs 11 lakh. She has no other source of income. Due to lack of knowledge and poor advice, no Capital Gains was declared in 2007. She however invested some part of the money in mutual funds in 2009, which has now been called for clarifications by the IT dept.
    Can she declare the sale of the land now? what will be the tax? Further, she had spent some money in fencing and making/redoing of the boundary wall a few times until the plot was sold. She however does not have any receipts for the same. Can this be deducted in the Capital gains?

  168. P. Manjunath Swamy says:

    Sir, My father purchased a site in the year 2000 and he gifted the same to me in the year 2009. I sold the said site on 27th September 2011. Will Capital gain attract in my case, if so, which one whether it is long term or short term, I am planning to purchase another site or built house by investing the entire amount or little more. I am confused, please clarify. Also let me know whether can I join my sister and jointly invest my entire amount as my share in any property, please clarify

  169. i have booked a flat in 2007 & entered into an agreement to sell with Buider in 2007 . Builder offered me the possession in 2011 after 4 years . There were some issues with the buider regarding additional demand along with offer of possession & hence till date i have not taken the possession of the flat .
    I want to sell off this flat now which is fetching a premium in the market . My query is – This premium amount would be considered Short term capital gain or Long term capital gain ( as i have holded for more than 3 years from agreement to sell ) .
    Will it be considered as sale of under construction flat ?

  170. ajay sehgal says:

    My wife had purchased a land amounting to Rs 72000/- in July 2005. She sold it in August 2011 at Rs 1450000/- and purchased a land having cost about 18 Lakhs in Jan 2012. Please suggest if she has to pay any LTCG for above sale.

  171. Dr. A.K.Mishra says:

    We want to sell our house which is around 20 yrs old. We have already purchased a new house in another city and presently living in it since last 2 years. The question is can the amount received from selling the old house be utililized in purchasing the Farm House? if yes, will it be considered as it’s investment and total amount shall not be taxed?

  172. Manish Kumar says:

    Thanks Rag for this fantastic website.

    My question is – Is it possible to reinvest capital gains (acquired from a single ownership property) in a joint-ownership house to get the tax exemption?

  173. I sold a property in June 2011 and purchased another one in July 2011 and paid almost 95% of the cost.
    I sold another property in Nov 2011.
    Can the capital gains from both properties sold be used in the property purchased in July 2011.
    I still need to pay 8% of the cost price of the property purchased in July 2011 and stamp duty, both of which needs to be paid in April/May 2012.
    If the total cost of the property purchased is more than the combined sale price of the 2 properties sold, do I still need to invest the LTCG in tax free bonds. Thanks & regards

    Pl reply.

  174. Dear sir,
    I have entered into an development agreement of apattments therefore i am getting about 10 residential flats,which is a worth of 1 crore.
    so my auditors suggestion is 50 lakhs should invest in NHAI or REC in that year and 20% capital gain tax on remainig 50 laks is 10 lakhs but my request information to you is i want to invest the total 1 crore in cash bonds in 2 years (50 laks +50 laks) so that there is no excemption kindly suggest me

  175. Dear Sir,
    I purchased a property 15 years back for 10L and now its appreciation value is of 50L. Kindly share that as per law if I can buy 2 properties from this appreciated value thereby saving tax and LTCG or can purchase only 1 property from this amount??
    Kindly guide me on this aspect.

  176. No matter if some one searches for his necessary thing, therefore he/she needs to be available that in detail, so that thing
    is maintained over here.

  177. Hi there! This blog post couldn’t be written much better!

    Looking through this post reminds me of my previous
    roommate! He constantly kept talking about this. I am
    going to forward this article to him. Pretty sure he will have a very good read.
    Thank you for sharing!

  178. Thanks for the auspicious writeup. It actually was once a enjoyment account it.

    Look complicated to far introduced agreeable from you! By the way,
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