I receive a lot of queries on Long Term Capital Gain. Each case is different from another. In my post, capital gain tax, i discussed long term capital gain in detail. It is a vast subject and not possible to cover in the single post. The rules related to long term capital gain from house property are different. There are a lot of myths and misconceptions about long term capital gain from house property. The objective of this post is to clarify the doubts of the readers. Secondly, a lot of readers share references of the decision of courts and income tax tribunals. These decisions are exceptions to section 54 under income tax act. You will always find such judgements but these rulings are situational in nature. In my opinion, these judgements do not supersede the spirit of income tax act. Therefore, you can act based on these judgements but at your own risk.
One of my readers posted a query whether he can claim home loan interest as an expense while calculating long term capital gain. He already availed deduction on home loan interest u/s 24(b). As per the rule, you cannot claim interest component as an expense because then you will be availing double taxation benefit on the same amount i.e. home loan interest. I was anticipating that he will quote the ruling of Chennai income tax tribunal in this regard. I was proved right :). In its judgement, Chennai Income Tax tribunal allowed double taxation benefit. First deduction u/s 24(b) that deals with income from house property. The taxpayer again claimed a deduction for computation of long term capital gain. The reasoning given by tribunal was that both the sections are altogether different. I agree but they are part of same income tax act :). Secondly, it violates the basic principle of taxation i.e. you cannot claim double taxation benefit. A taxpayer is free to claim double tax benefit on home loan interest citing the ruling of Chennai Income Tax tribunal. Personally, i will not do that. One of the logical reason can be provided if the taxpayer has not claimed a tax deduction on home loan interest u/s 24(b). In this case, he can claim home loan interest as an expense. The point is, a taxpayer should be able to justify in the case of clarification from Income Tax department.
I don’t want to confuse the readers and my stand is very clear that individual rulings can act as reference or citation but is not law/rule/regulation. At the same time, these rulings are not amendments to income tax act, can be challenged and overruled anytime. As a taxpayer, the income tax act is a bible and that should be followed from heart and soul. Let’s check some of the unknown facts about long term capital gain from house property.
Long Term Capital Gain from Property – 11 Least Known Facts
1. To save Capital Gain, You have to invest only Long Term Capital Gain not the entire Sale Proceeds:
The father of all confusions. In the majority of the cases, i observed that to save long term capital gain, the taxpayer invested entire sale proceeds. For example, one of the readers sold the property for 1.5 Cr and his long term capital gain was 47 lac. In order to save Long Term Capital Gain tax, only an investment of 47 lac would have sufficed but he invested entire 1.5 Cr.
2. The Exemption from Long Term Capital Gain is available only for Residential Property of Individual or HUF:
Recently, i received a query wherein one of the reader sold the residential property and bought commercial property. He claimed an exemption for long term capital gain from the sale of residential property against commercial property. Subsequently, he received notice from income tax department and has to deposit capital gain tax with a penalty. As a thumb rule, both the properties i.e. property sold and the property bought to save capital gain tax should be residential. Any other combination is not allowed. Residential property includes residential farm house. A common query from uber rich in Delhi :).
3. Clubbing of Capital Gain from Multiple Properties:
You can club capital gain from multiple properties to buy one property. For example, one of my clients sold two properties and his LTCG was Rs 37 Lac and Rs 22 Lac respectively. He invested capital gain from these two properties and bought a new property for exactly 59 lac to save LTCG tax :). It is allowed but the reverse is not true as discussed in next point.
4. Investment of Capital Gain from Single Property to Multiple Properties:
The inverse of point no 3 is not allowed. In short, Long term capital gain from the single property can be invested only in one property. For example, if i incurred a capital gain of 70 lacs and buy two properties of 40 lac & 30 lac. In this case, i can claim the exemption only for investment in single property i.e. either of two new properties. Assuming, i claimed exemption on 40 lac property therefore, i have to pay LTCG tax on 30 lac.
5. Residential Property purchased outside India:
This point is especially for NRI’s. Long term capital gain is exempted if you purchase property in India. You cannot claim an exemption on property bought outside India. You can buy a property outside India through the sale proceeds of Indian property after paying LTCG tax.
6. Closure/Prepayment of existing Home Loan to save LTCG tax:
There is a lot of confusion in this regard. The answer is YES provided you bought and availed home loan on residential property within a period of one year before the date of sale of the old house. For example, i have two properties i.e. Property A and Property B. I bought property A on 1st April 2008 and Property B on 1st April 2015. I bought property B on Home Loan of 50 lac. Now, i sold Property A on 20th Jan 2016 and my long term capital gain is 20 lac. In this case, Property B is purchased within one year before the date of sale of Property A. Therefore, i can pay 20 lac capital gain from sale proceeds of Property A to prepay the Home Loan of Property B to save Long Term Capital Gain Tax.
7. It is not necessary/mandatory to invest 100% Capital Gain:
Let me share an example. From the sale of residential property, my capital gain is 50 lac. There is a common misconception that to save the LTCG tax, an individual has to invest entire capital gain i.e. 50 lac. It is not true. You can invest 30 lac to purchase new property and pay long term capital gain tax on balance 20 lac.
8. Capital Gain Exemption can be Withdrawn:
If you sell new property purchased to save capital gain within 3 years from the date of purchase or completion of construction then any exemption claimed earlier will be withdrawn. The amount of exemption claimed for the old property will be deducted from the cost of acquisition of the new house. In other words, the individual has to pay additional short term capital gain tax on the exempted long term capital gain from old property.
9. Date of Transfer of Property:
Normally, the property transfer is a long process. It is two step process i.e. sale agreement is signed and then sale deed is signed. In the case of a home loan, payment is in installments. An individual is confused which date should be considered for transfer of property. The answer is Date of receipt of compensation is the date of transfer of the property (Whether original or additional). In short, the last installment date is the date of transfer of property.
10. Date of Acquisition of Under Construction Property:
There is a confusion on the date of acquisition of under construction property. A general perception is that date of possession is the date of acquisition or purchase of the property. It is not true. Though there is no direct reference in income tax act but the date of allotment letter from builder to the buyer is the date of purchase of the property. After receiving allotment letter, you can transfer the title of the property, therefore, it is the date of acquisition. In short, from the date of allotment, the title is transferred in your name or you obtained right to conveyance.
11. Long term capital gain from residential property cannot be offset against other losses:
The long term capital gain from equity, gold, mutual funds etc can be offset against long/short term capital loss and loss from business/profession. It is not true for long term capital gain from the sale of residential property. To save LTCG from the property, you can invest only in residential property or Capital Gains Bond.
I have covered all the important points related to Long Term Capital Gain. Hope the readers will find this post useful. Please feel free to post your general queries in following comments section.
Copyright © Nitin Bhatia. All Rights Reserved.
I one invests LTCG realised through selling of a commercial property. Can it be offset by buying a commercial property ?.
No
Will it be offset only if I purchase residential property ?
Yes but provided you had only one residential property at the time of sale. Secondly, you need to invest entire sale proceeds. Personally, i will prefer capital gain bonds. Today i will be publishing a post on similar topic. I request you to check the same in evening for detailed explanation.
Thanks for the answer to my query.
above in point 3 you mention that one can club capital gains from multiple properties, but here you mention that one can offset capital gains tax by purchasing a residential property provided one had only one residential property at the time of sale, Please clarify
Here we are discussing capital gain from commercial property.
Please let me know which would be my date of purchase for calculatin LTCG, the day on which I gave the token to book the flat, date of registration or the date of posession letter
It is subjective. You can take date of possession.
syam
To consider LTCG gains whether Residential property includes housing plots, agriculture land fit for housing sites, agriculture land, pl confirm
That’s correct but need to check the rules as rules are diff for agricultural land.
Dear Nitin,i have a query regarding LTCG.If the entire Capital Gain is enough to reinvest in Residential land and there is no money available right now for construction of House ,then what is the time frame available for re-investment.Is it 2 years or 3 years.Thanks.
Each Assessee i.e. You and your husband can claim individual deduction of 50L each. For more details, please check following link
https://www.nitinbhatia.in/real-estate/capital-gain-bonds/
That’s correct provided total investment in capital gain bonds is not exceeding 50 lacs. The limit of 50L is for transfer of one or more original assets during the FY.
Thanks Nitinji for your quick response, appreciate it
I have one more query , if a person sells one flat in Feb 2016 and deposit 50 lacs in
in,capital gain bond in March 2016 and sells another flat he possess in April 2016 and deposit another 50 lac money in capital gain bond in May 2016. Can he do so , as the financial year is changing in April 2016 , he could deposit up to 1 crore in capital gain bond of two different property, is it true.
That is possible provided all other conditions are fulfilled.
Thanks once again, so we can put up to 1 crore in capital gain bond if both the property are sold in two different financial year and put in capital gain bond within 6 months in the respective financial year they are sold.
Yes
Hi,
I have a query , now we have an account in SBI where the limit on the check book is 10,00,000. We want to put 50,00,000 in capital gain bond, can we issue 5 cheque a of 10,00,000 or fill 5 forms of 10,00,000. Is it allowed or will our application be rejected.
Spoke to SBI and they say now we cannot issue cheque for more than 10,00,000.
Is it possible to give 5 cheques in one application or have to give 5 applications.
Is it allowed.
Thanks once again for your help
In the application form of capital gains bond there is an option to enter only one financial instrument i.e. cheques/DD/Bankers Cheque. I suggest you to request SBI to issue Banker’s Cheque or DD of 50L from your bank account.
For proceeds from sale of property we opened saving account in Sbi and all receipts are being deposited in the same account. However our Demat accounts are in Icici bank.
And as we want capital gain bond in Demat format can we open an additional Demat account in Sbi as well for each of us. Or we have to continue with Icici bank Demat account only.
I will not prefer multiple demat accounts. You can issue cheque of SBI to ICICI Bank for capital gains bond and provide your demat account no.
Hi,
I purchased 1 builder flat on 20/5/10 (Allotted on 16/8/10) at a price of 21 Lacs (with Home loan of 17 Lacs). I got its possession on 23/01/15 after paying Registry charges of 1.50 Lacs.
Total Purchase price = 21 + 1.5 = 22.5 L
I sold this property at 47.5 L on 20/2/16 after paying 14 L as balance loan amount.
LTCG ( as calculated) = 13,29,114
Also, I am planning to buy a property of 95 L ( with 65 L Home Loan). Balance 30 L + 6 L (Registry Amount) I will pay from the sale amount i received from old property.
Below are my queries:
1) Is this LTCG calculated correct? Do i need to pay any LTCG tax?
2) Can I use Balance of 47.5 – 36 = 10.5 Lacs in other expenses like Furniture or renovation of new flat? Do i need to retain all bills of this renovation for future reference.
3) I sold my old flat in FY 2015-2016 and will purchase new flat in 2016-2017. Do i need to mentioned this while Filing ITR (ITR 1 as I am salaried employee).
Thanks & Regards
Rohit
Calculation of capital gain comes under personalized consultation and is available on paid basis.
Please suggest can this query be answered via Paid Telephonic consultation or i need to go for Advisory Service.
You may opt for onetime advisory service
Dear Nitin Sir,
Does this case comes under STCG not LTCG??
You have not mentioned whether you registered the property before selling or not.
Hi
Nitin, Thanks for this useful info.
How do we calculate capital gain on a land sale (ancestral property 40+ year old). We sold an old ancestral property for 25 lacs, so wanted to understand what amount has to be reinvested.
Thanks,
Ujjwal Sinha
1981-82 will be considered as base year. Please check my following post for capital gain calculation
https://www.nitinbhatia.in/personal-finance/capital-gain/
Hi Nitin,
I had two residential flats which I sold within a span of 8 months i.e. Sept 2015 and May-2016. I have earned LTCG from both flats. Will I have to pay any LTCG Tax if I have purchased a residential flat in August 2015 the cost of which covers the cummulative LTCG of the flats sold. Please advise. Thanks, M.H.Gandhi
LTCG of two flats cannot be invested in single flat to claim capital gain tax exemption. Therefore you need to pay capital gain tax on on LTCG of either of one flat. Alternatively buy another property or invest in capital gains bond.
Point 3 is depicting reverse of what you are suggesting. ??
Hi Nitin,
I paid 95% of the sale value on for a residential plot by Cheque + 5% on Cash on Nov, 2013 for which a sale agreement has been signed advising the possession has been given.
And the same property was registered on a later date i.e., Feb,2015.
In my scenario above, what date should I consider to take long term capital gain benefit.
Feb 2015
Sir,
Thanks for your reply.
Since I had paid full amount and had got possession by NOv, 2013… can I not claim long term from Nov, 2013 under section 2(29A).
Best Regards,
Girish
In my opinion NO.
Hi Nitin, Pls. advice if person is having 4 residential properties and by selling one property can claim LTCG exemption in investing one more residential property ?
Prima facie YES but It is subjective depending on whether sale/purchase of property is a business of a seller or it was for investment purpose.
Hi Nitin Sir,
I sold 1 commercial property in parts ( part-1 , part-2).
I sold another commercial property (property-2) which I received from my ancestor.
I purchased one residential house in order to save tax.
Commercial Part-1 sold in FY 14-15 and invested in capital gain account.
Received a residential property from ancestor during FY 15-16. Before this no residential property was on my name.
New under construction residential property purchased in FY 15-16. Taken out capital gain money for new property and home loan for remaining amount. (purchased property value > value of part-1)
Commercial Part-2 sold in FY 16-17.
Commercial Property-2 sold in FY 16-17.
Received possession of new property during FY 16-17.
Invested amount received from Part-2 and Property-2 into home loan prepay.
Yet to pay some amount of home loan as purchased property value > value of part-1 + part-2 + property-2.
My doubts are as mentioned below:
1) Since I have sold and purchased properties in different years, can I claim all sold properties against one purchase or only one ?
2) I have sold commercial properties and invested in residential property. Is that fine ?
3) I received one residential property on my name during FY 15-16, and during the same year purchased new residential property, will I be eligible to show investment since I own a residential property while investing ?
To answer your queries, i need to go through more details as there are multiple transactions involved. Therefore, it is critical to go through micro details before answering the same. You may post any general query on this forum.
I have sold a residential property for Rs 25 lacs and capital gain is 17 lacs.
I have purchased another property in same year for 43 lacs Plus 2.15 lacs stamp paper and commission.
I have taken home loan of 40 lacs .
Do I still attract capital gain tax.
The bank is ready to give 28 lacs on date of registry in sellers name and balance 12 lacs after date of registery in my name.
Kindly advise
You need to invest 17L in new property then only you can claim exemption on capital gain tax.
Sir , As I understand its not necessary to invest the same money( capital gain) to avail tax exemption.In other words, even if Loan amount plus capital gain is more than purchase price of new property , exemption can be claimed.
Sorry i could not understand your query.
Sir this was in context of Sameer Jain query, since the cost of new property is more than 17 lacs i.e. the capital gain, the capital gain exemption will apply irrespective of the fact whether he is also availing home loan of Rs. 40 lakhs or not .Is my understanding correct ? thanks and regards
It is not correct. In layman terms, if he bought new property for 43L and to save capital gain he has to invest 17L from the sale proceeds of old property in new property. Therefore, home loan cannot exceed 43L minus 17L i.e. 26L.
Dear Sir,
My mother sold the residential flat that she partly inherited from her mother along with my aunt sometime on 27th September 2014. She invested the proceeds in an under construction residential flat located in an apartment project in November 2014 (full upfront payment). At that time she signed what is called Agreement to sell/construction agreement with the builder. The apartment at that time was just in the process of foundation setting up. As of today, the basic structure is complete and tiling on the insides is being done. It was supposed to be ready in Dec 2016 but might go on until Mar 2017. Technically, she should register before 25th September this year.
I suppose my question is: does she have to register the flat before the end of two years of sale of her inherited residential apartment OR does she have a provision of another year of extension since it’s “under construction” OR is that the provision of the extra year of (2+1) applies only when one is building an individual house on a plot ?.
Please advise.
Thank you.
For under construction property you have time of 3 years to complete the construction irrespective it is individual house or a flat.
Thank you for your much valuable advise sir !
Dear Sir,
I own a residential flat(acquired in 1990) and a residential plot(acquired in 2000). Now I am planning to sell my residential plot and invest the entire capital gain for purchase of another residential flat. As I am selling my residential plot and acquiring one residential flat, please let me know whether I be entitled to exemption of capital gain tax on the Long term Capital Gain?
Yes, you are entitled for exemption of capital gain tax provided you fulfill all other conditions.
Dear Sir,
I own a property in joint name with my wife, which was funded by both of us from respective salaries/savings, claim income tax deductions on interest paid for loan obtained by both of us from employer as well as HFC (on second mortgage basis) individually. Now we have sold the same property in Apr, 2016 which has resulted in capital gains of Rs. 25.00 lakhs. Buyer has deducted TDS and deposited in both the name separately at in equal ratio @Posa jolis% of sale price. Now we have finalized another under construction house property at cost of Rs. 25.25 lakhs purchased in the joint name in Apr, 2016. Part payment shall be made till July 2017 and balance amt we shall transfer to LTCG Account opened in the joint name. Since the property sold and purchase is in joint name, can we claim long terms capital gain tax benefit separately showing acquisition value at 50% each and realization of capital in equal ratio of 50:50 ( i.e. Rs. 12.50 lakhs) each? We both are tax payers and my wife has one self occupied house at different city as on date of sale/purchase of these properties discussed herein. Pl advice.
Thanks
Prima facie your understanding is correct. I could not understand how come your wife’s property in another city is self occupied and secondly if the under construction property purchased is not completed in 3 years then the exemption claimed on capital gain will be taxable.
My wife self occupied property in different city was purchase by her from her own fund and loan and is occupied by parent, since she is working in different city. I think this the property at home town occupied by parent is considered at self occupied property, since the property which we sold was rent out and income derived from rent was considered for tax calculations.
Sorry i could not understand your query fully. If your wife is staying in same city in which she owns the property then only it is self occupied property for her.
Dear Sir,
I wish to sell my flat in Sept 2016. I had purchased from a Builder this flat on 20 June 2013 & registration was also done on 20th June 2013.
The Builder gave me possesion letter on June 2016 as I had to pay him Development charges which I paid in June 2016.
Please advise will this transaction be a STCG or LTCG.
Short Term Capital Gain
Dear Sir,
Thanks for the feedback.
But wanted to know as i had done the registration in June 2013 & accordingly stamp duty & other charges was also paid in June 2013.
Why my gains are consider as STCG and not LTCG even thou my holding period is more than 36 months.
Thanks in Advance.
You received possession in June 2016 therefore now date of possession will be the date of acquisition for the calculation of capital gain.
Dear Sir,
Kindly advice if the components of home improvement, commission can be paid out of the amount deposited in the capital gain account?
It is subjective. I am assuming by commission you mean brokerage. You can utilize the amount in capital gain account only towards cost of acquisition. Therefore, you cannot pay home improvement expenses as it is not a cost of acquisition whereas brokerage is included in cost of acquisition provided the agent is willing to issued proper payment receipt.
Dear Sir
I alongwith my wife bought a property in joint name ( SAY PROPERTY A ) .The loan amount of 20 lakh taken from a bank in joint name ( since the property is in joint name ).The loan instalment paid by me, also the benefit in income tax taken by me .The property was registered on 30 th march 2016 & the loan prepaid by me on June 2016 .
My ancestral property ( SAY PROPERTY B ) was sold & amount received on July 2016 in my name ,out of that LTCG was 40 lakh , but the property is not registered in favour of buyer till now .
1 ) For me the period of LTCG investment in property will be 1 year before & 2 year after July 2016 ( (The amount receiving date ) ? Also for me LTCG investment in bonds will be 6 months from July 2016 ?
2) Can I show 20 lakh of LTCG as investment in Property A or it will be 10 lakh ( since jointly owned )
3 ) Or I cant show any LTCG in property A because prepayment already done Or it is jointly owned
1. As the title of the property B is still not transferred therefore the timelines will be calculated from the date of property registration.
2. You have not mentioned the cost of property A and i am assuming the loan is not paid from the LTCG
3. As i make out home loan prepayment is not from capital gain therefore you cannot claim capital gain exemption on home loan prepayment.
Dear Sir
Thanks for the reply .
1) The property B costs 30 L & the prepayment done from my own fund not from LTCG .
2 ) I want to invest LTCG in capital gain bond .I received the amount on 7 th july 2016 . Will the time limit of investment will be till 31st Jan 2017 .?
Dear SIr
Please READ property A in place of property B in my last mail sent on 5/10/2016
Please re-post your query with correct details.
Dear Sir
Thanks for the guidance,
1) The cost of Property A was 30 L & I prepaid from my savings not from LTCG .So I cant show LTCG in prepayment .
2 ) If I will invest in capital gains bonds , since I received the amount of 40 L on 07/07/2016 then will the time limit be up to 31st jan 2017 ?
You can invest in capital gains bond till 31/01/2017
Dear Sir,
I have a LTCG of Rs 70 lakhs(after indexation) on sale of my property. Can I invest only Rs 50 lakhs in specified bonds and will the Balance of Rs 20 lakhs be taxed @20%. Is there any way I can save tax apart from investing in another property.
Secondly, when I bought this property, cost as per conveyance deed was Rs x. However, I made some addition to it and the value appearing now in my Balance sheet is more than x. For calculating LTCG will the Income tax department consider cost as per conveyance deed or as whatever I say (Balance Sheet was never submitted to Income tax as it was not required).
Thanks
1. There is no other way to save LTCG
2. You can include indexed cost of improvement for LTCG calculation. It will reduce your LTCG liability. I am assuming you have bills to prove your claim.
Sir,
For indexing cost of acquisition and improvements, while I have the purchase contract to prove my cost of acquisition , I don’t have any bills to prove the cost of improvement. As an individual assessee since I don’t have to maintain books of accounts, I did not keep any bills . Moreover, improvements were done over 10 years ago. Please advise how to consider this? Since the property (flat) I am selling is over 30 years old and normal improvements can be expected , will a reasonable amount be allowed by tax officer.
Thanks
Sunil
I do understand your concern but unfortunately without proper bills you cannot include indexed cost of improvement for LTCG calculation.
Dear Sir,
Greetings.!
I had sold my flat on 15th Jan 2014, and deposited the LTCG of Rs21 laks in Capital Gain Deposit Scheme( CGDAS) in a public sector bank. Is it possible that I can purchase a old house( may be farm house) from the Rs 21 laks and spend money in renovating it OR give it a new shape by modifying it before 14th Jan 2017 ??
Is there any other way of utilising the money lying in CGDAS account.
Your advise will be appreciated.
Please check my following post
https://www.nitinbhatia.in/real-estate/capital-gain-deposit-account/
Dear Sir,
Greetings! I have gone thru your link which you had advised and I have come to the conclusion that I have to pay Tax on LTCG which is deposted( Rs 21 Laks) in LTCG account in Bank..!
Your article has explained in simple terms the various aspects of LTCG.
Bur Sir, I have not been able to get clarity on my query of ” Purchasing a old house in a village/ or farm house and spending money on the same for renovation etc before 14 Jan 2017?” In this case will the tax exemption be allowed..?
Is there a process where in we can request the IT dept for an extension of the time period by 6 months that is upto 14th Jul 2017.??
Would appreciate your advise
Firstly, the exemption is available only on purchase/construction of a property not on renovation. The 3 year timeline is only for construction. As i understand, you will only undertake renovation not the construction. Therefore, in my opinion, in this scenario your time limit of 2 years to claim capital gain exemption for purchase of a property is already over in Jan 2016.
My wife & I are co-owners in a residential flat, for which the EMI is being paid from my income. My wife also owns an ancestral residential plot which is now being sold. If the Capital Gain is now invested in buying another residential property in our joint names, in the same or different city where we already have the co-owned flat; will we still be able to claim the LTCG Tax benefit ?
Yes. Your wife can claim LTCG exemption in proportion of ownership in the property.
Dear Sir,
Me and my wife recently sold a flat of our joint ownership. The entire cost of acquisition was funded by me, the EMI was also deducted from my salary account. Now on sale of the property, I do not wish to reinvest in property and just want to pay tax on long term capital gain. I just want to know whether I alone can pay tax for the entire capital gain or I have to first share the sale proceeds/capital gain with my wife and then me and my wife has to pay 50 : 50 tax on our share. Any help would be highly appreciable.
P.T.
The answer is subjective but based on the ruling of various income tax tribunals, as 100% contribution towards the property was from your end. Therefore, you can pay capital gain tax and retain the entire proceeds. In case of any clarification from IT, you can clarify your end.
Dear Sir,
I own two vacant lands in different localities of Bangalore and am in the process of selling both of them. Can I avail exemption from Capital Gains Tax if I invest the Combined Net Consideration from both the plots in a house property? I already own a house property in the city.
No. You cannot club and claim capital gain exemption for 2 properties by investing in One property. It was allowed earlier but now it is not allowed.
nitin sir i have one query on point 8, for old ansecstoral p roperty sale my capital gain was 23 lacs which i invested in new property value 27 lacs within one year in 2013 december, which i again sold in july 2016. considering i m jobless and have no income source what will be my tax liability? will i have to pay tax as per old house that is on 23 lacs?
due to financial problems i will not be able to buy a house
thank u
As i shared 23L will be deducted from the cost of acquisition of the property. Therefore, if you are selling the new property for 50L within 36 months then the cost of acquisition will be 27L minus 23L i.e. 4L. Your short term capital gain will be 50L minus 4L i.e. 46L and it will be taxed as per your income tax slab.
much thanx wil have to pay advance tax i am yet to recieve balance payment from disbursing bank so i pay after that correct? can i pay in one go if so i had withdrawn parially from my ppf account this FY can i deposit 1.5 from that back and claim deduction.
if yes when to do that i mean dedct from advance tax or when filig ITR next year i have to claim refund
Your queries are not clear to me. If you have not received the consideration value then i will not suggest you to consider the same in your advance tax calculation.
sir i meant i had recieved only 20% from buyer as downpayament in july 2016, balanc e he availed home loan which i will get in 10 days max.
also on old house i did not declare my ltcg FY 2013 2014 as i thought i was investing in new house anyohouse so no need to declare . now what to do since the LTCG now revoked as i had to sell within 3 years my new house
Firstly you should calculate your tax liability as on date excluding any future receipts & pay advance tax accordingly. Secondly, it seems you kept the LTCG in the capital gain deposit account scheme. Therefore, you can pay the capital gain tax and take AO approval to withdraw the amount. Lastly i could not understand which house you are selling within 3 years.
sorry for the confusion case is
1) inherited property sold
2) ltcg was not declared in ITR filed in AY 2014-15 due to lack of awareness
3) LTCG was invested in new underconstruction flat in same FY
4) this flat was again sold within 3 years of acquisition
5) now will have to pay STCG
6) conflicting views on component total cost of acquisition of new flat which was sold.clubhouse and developmnt charges along with service tax to be included long with agreement value, stamp and registry nd service tax on that
To answer this query, i need to go through complete details. Prima facie, the capital gain tax exemption of inherited property will be reversed.
agreed sir my problem is 2013-2014 ltcg was not declared in ITR what is the remedy now
You may approach your AO to check the same.
The order was delivered in 2012 whereas inputs shared by me are based on recent developments. The order of Appellate tribunal is case specific and does not supersede the law of the land/act. Lastly, at most the orders of appellate tribunal can be refereed in same jurisdiction area not outside it. For example, order of Mumbai appellate tribunal can be referred only in the Mumbai jurisdiction area. Though you can take the reference of same in other jurisdictional areas but it is subjective.
My opinion remains the same as i shared in previous comment.
Dear Sir,
My father sold his house in Mar 2016 and deposited the amount in capital gains account in a public sector bank.
In Oct 2016, he purchased an under construction flat from landowner’s share. The flat is registered to his name. The construction of the flat will be complete in 2019.
As per the Income Tax rules, one has to purchase a residential property within 2 years.
In this case the registry is done within 2 years but the possession of flat will happen after 2 years time period.
What is considered as date of purchase of new property to save capital gain tax date of possession or date of registry of flat ?
Regards,
Abhishek
In case of under construction property, he should get possession within 3 years i.e. on or before Mar 2019.
I sold my house in April 2016. The money is currently deposited in capital gains account.
I am planning to buy a flat in a gated society which is under construction.
The builder will give me allotment letter of flat in Dec 2016.
The possession will happen in Dec 2019.
The registration of flat will happen a couple of months before completion so tentatively Aug 2019.
Complete capital gain from previous flat will be invested by March 2018 i.e. with in 2 years of the sale of old property.
As per Long term capital gain tax :
1) a residential property has to be purchased with in 2 years. OR
2) a house to be constructed with in 3 years.
Which category purchase of under construction flat comes 2 years or 3 years ?
What will be considered as purchase date in this case, date of allotment letter, registration or possession date ?
Will I be exempted of capital gain tax ?
I think i answered this query earlier also. Just to add that a house should be constructed within 3 years.
Nitin Ji….I bought a property in May’13 and obtained its possession in Nov’16. I have not registered the property yet…if i sell it in November’16 itself…will it qualify for LTCG…!!!!
Please check my following post. I have explained this scenario in detail.
https://www.nitinbhatia.in/real-estate/under-construction-property-capital-gain/
Nitin Ji, I became a member in CGHS in 2003 for acquisition of a 3 BR flat. The following are the dates:
Date of Share certificate 6-Oct-03
The payments were made for the flat from 6-Oct-03 till 3rd May 2014
Certificate of occupancy 1-Nov-15
Certificate of Allotment 19-Oct-15
I sold the flat in April 2016.
Please let me know if this is a LTCG or STCG.
In my opinion it is STCG.
Hello Sir,
I sold a flat on 20th May 2016 in which my father was Co-Owner.
Total LTCG = Rs. 176347
In Aug 2016, Using amount received from sale of flat + Home Loan, I have purchased a new flat in my name only.
1. Can I Claim for 100 % LTCG exemption?
2. Is my father and me have to pay tax on LTCG?
1. Yes
2. Assuming your father has not invested LTCG then the LTCG tax is applicable in your father’s case.
dear sir,
i have purchased/registration a residential plot on 8/1/2010 on rs. 17lacs at gurgaon and thereafter start construction on it from local thekedar including labour+material cost and having a agreement in between him and me to construct the building on this plot in rs. 15lacs including labour+material cost this agreement was made on rs 100 stamp paper but was not notarized(this was just made for understanding between him or me) this building was completed in may-2011 and got occupancy certificate on 7/7/2011. now i am going to sale this property in dec-2016 for rs 80lacs and same amount going to invest to another property with in 1-2 months. my question as follows-;
1 what is the actual date for calculation/consideration of capital gain i.e. 8/1/2010 or 7/7/2011.
2. on which amount capital gain calculate after consideration of index cost i.e rs 17lacs, 15lacs or 17+15=32lacs
3. is this short or long term capital gain
4. i don’t have any construction bills how will be income tax dept consider the actual value of construction. can they ask for same
5. if i am going to invest entire sale amount to purchase new house in that case still i need to calculate capital gain and need to show in income tax return.
1. 7/7/2011
2. 32L
3. Long term capital gain
4. If you don’t have bills then you cannot include construction cost in cost of acquisition.
5. Yes
Dear Sir,
I incurred the loss of Rs. 500000 in shares on which STT is paid in the FY 2011-2012, this I have entered as short term capital loss and has carried forward in books.
In 2013, I bought an under-construction flat for investment purpose, agreement for which was entered in July 2013.
Now the flat is complete and ready for registration.
From your article, I have understood that
Case 1 : if I sell this before registration it will be treated as long term capital gain (tax payable is flat 10% or 20% with indexation benefits, from the date of agreement.)
Case 2 : If I register it, then I will have to hold it again for 36 months from the date of registration before it is treated as long term capital gain. (tax payable is flat 10% or 20% with indexation benefits from the date of registration)
Case 3 : if I sell it soon after registration, it will be treated as short term capital gain (tax payable will be added to my annual income and taxed as per the slab).
Request you to kindly help me know
1. If the cases mentioned above are right ?
2. Can I adjust the short term capital loss which are being carried forward in any any of the cases mentioned above ?
1. Your understanding is correct. LTCG tax is 20% with indexation. Please check my following post for more details on same topic
https://www.nitinbhatia.in/real-estate/under-construction-property-capital-gain/
2. Short term capital loss from stocks cannot be adjusted against Long term capital gain from the property. It can be adjusted against same head.
Sir,
I had a very old second house property which was not in habitable conditiondition due to the age of the building. Part of the building was in fallen state. I am reconstructing it using ltcg money from selling a land. Would like to know if I am eligible for for tax benefit.
Thanks
Anil
As i understand you are only re-developing the existing property. Therefore, you cannot claim capital gain tax exemption.
Dear Mr. Nitin,
Need your help with a scenario.
My Father sold his flat on 31/3/2016 and have some capital gains on it. Here is the situation:
1> We have started constructing a new house since September 2014 and completed on December 2016. Can the cost incurred be considered for Capital gains exemption?
2> We have gone past the 6 month timeframe to invest in REC / NHAI bonds for the Capital gains part but can invest in Jan 2017. Is there any issues to this? Please note that although the sale on paper happened on 31/3/2016, we actually received all the Money from proceeds of the sale by October 2016 only.
3> Also the property which was sold was in both my Fathers and Mothers name. Can the Capital gain income be split between the two so that it can separately be claimed for tax exemption by them individually so that they can take advantage of their separate Non Taxable bracket?
Appreciate all your help regarding this matter.
Thanks & Regards,
Vinay
1. No
2. You have not mentioned the reason for delay in receipt of full and final settlement.
3. Yes. It should be in a proportion of ownership in the property
Thank you very much for your reply.
Regarding clarification asked in point 2, the reason for days was just that the Payer wanted to pay in installments as he did not have sufficient funds to pay immediately and we as the Owner of the Property agreed to that. We actually started getting funds beyond the index price of the property starting 10th July 2016. Hope this clarifies.
Regarding point 3, I am not sure if there was any proportion specified in the legal document. I just know that Property was in both my Father and Mothers name. I will find out if there is anything more to this.
In opinion, you cannot claim capital gain exemption now even if you invest in capital gains bond. The title of the property was transferred on 31/03/2016 therefore as i understand income tax department will consider 6 months period from the date of transfer of property title.
If the % ownership is not mentioned then it is considered equal.
Thanks Nitin, For this fantastic article. I am reading your blogs and this is really great job you are doing.
I have one query and hope you will answer that.
I have flat A purchased 12 years ago and Flat B 3 years ago I am owner/co-owner in both flats. Now I am planning to upgrade and purchased Flat C 3 months back. My query is 1) If I sell flat A in next 9 months, then am I eligible for LTCG exception as I have purchased Flat C. 2) Is there any clause that there should not be more than one home on my name when I am claiming benefit for LTCG ?
1. Yes. You can claim LTCG exemption
2. You are right. You should not hold more than residential property
Your answer 1 is contradictory to answer 2.
I will not able to claim LTCG exemption in flat C as I have flat B is already on my name. Am I right?
Both the answers were independent of each other as you posted separate queries. If you combine both the queries then answer is NO i.e. you cannot claim LTCG exemption.
I think long term capital gain section 54 does not mention any where about more than one property it is section 54F. So If I claim tax under section 54 then also I will not able to claim exemption ? Can you point me to section where it is written ?
Sorry i could not understand your query.
I have one query
in this case long term capital gain is Rs.20 lakhs .A new house property is purchased with in one year of sale, for Rs.70 lakhs by taking loan of Rs. 25 lakhs. Also furniture and fixture is sold for Rs.10 lakhs.
My question is that, in this case closure of loan is not required to save capital gain, since investment in new house other than loan amount, is Rs 45 lakhs which is exceeding the capital gain of Rs 20 lakhs
. No capital gain is applicable on sale of furniture and that will be treated as a capital receipt.
Your query is not clear to me. You are asking as an individual or as an organization. Secondly, the consideration value is not imp in this case. The imp point is how you utilized 20 Lacs i.e. LTCG from sale of property. I am assuming you invested this amount in new property i.e. out of 45 Lacs paid to seller, min 20 Lacs was from sale proceeds of the old property.
Dear Sir,
I sold a flat inherited from my father in oct 2016 for 12 lacs. Capital gains 5 lacs approx. I used this entire amount of 12 lacs to settle part of my home loan principle for my new flat for which I will be signing sale deed in Feb 2017 ( Agreement to sale date April 2015). Now I have two queries :
1. Can I avail LTCG exemption considering the date of sale deed Feb 17 ( As it is within 2 years from date of sell old flat)?
2. Can I claim deduction under sec 80 C for 1.5 lacs for 12 lacs I used to settle home loan principle?
Regards,
Rohit
It is not clear whether the property you are buying is under construction or resale property.
Sir, it is under construction property and I will be getting posession in Feb 2017.
okay. Please let me know the date of allotment letter for under construction property.
Sir, I have not received any allotment letter as such. I received a booking letter on payment of advance amount in March 2015 and then I signed the agreement to sale in April 2015.
Agreement to sale is registered or just between you & builder.
It is registered.
1. The capital gain is short term capital gain. It will be taxed at marginal rate
2. You can claim principal prepayment u/s 80C.
Sir, I missed one info..the old flat inherited from my father was purchased by him in 2001. So doesn’t it qualify for LTCG?.
In this case capital gain is long term capital gain.
dear
ours is partnership firm.We got capital gains from sale of industrial land by demolish building and sold machinery which is in municipal limites.The details are as under
land sale long term capital gains Rs 90 lac
development agreement on
long term land(notional) gain
ie we get shops for Rs 105 lacs
we partners distributed the shop
in their own names.
Now we are planning to put a
new unit with investment of RS 150 lacs
in rural with bank finance 100 lacs
Can we claim 54 g on which amount
This query required detailed calculation with some more details. I request you to take help of your CA in this regard.
Dear Sir
With the change in Base year from 1981 to 2001 for LTCG computation, will the gains incidence reduce or increase. Should we postpone sales from current FY to beginning of next FY
It will only impact capital gain calculations of property bought before 2001.
Nitin Sir,
Please help me to clear. I bought an under construction property by taking home loan which allotment letter signed with builder on Nov15 on 100 Rs. stamp paper, expected possession is Sept17,
I also own an another house for last 9 years and i like to sale this house around the possession date of my new home to pre-pay my loan on new home.
Could i utilise this future long term gain to pre-pay home loan or i have to pay tax on my gain as i became late to sale my old house.
The new property should be bought one year before the sale or within two year after the sale of the property. In your case, the condition to claim capital gain exemption is not fulfilled as you bought property in Nov’15. Therefore, you cannot claim capital gain exemption.
Thanks for reply sir, One last thing to clear is allotment letter the only date to consider even i am paying under CLP and just 40% is paid by bank and 10% by me and rest 50% is still to pay. Property bought date is mandatory to be allotment letter or can consider possession date or property register date in that case i can claim capital gain as i will sale old property before possession of new flat after pay loan with that amount.
Nitin Sir, As per verdict of ‘Jaimal K Shah, Mumbai Vs Department Of I.T.’ on April, 2012, in Bombay Tribunal “right of claim in Flat” & “Own Flat” are two separate stage and second stage start when first end. If i sale my old flat within 1 year after taking possession of new than in such case would i fall in long term capital gain exemption category.
The rulings of IT tribunal are case specific and cannot be generalized. You may give reference of tribunal rulings, to accept or not to accept is in the preview of AO. Normally, AO goes by IT Act.
For under construction property date of allotment is date of acquisition. Once you register the property the date of acquisition will reset to date of registration.
Dear Nitin,i have a query regarding LTCG.If the entire Capital Gain is enough to reinvest in Residential land and there is no money available right now for construction of House ,then what is the time frame available for re-investment.Is it 2 years or 3 years.
Also if the Capital gain was say 10 lacs and 8 lacs was spent on Land and 2 lacs was spent on construction and the house is not finished yet,will there be any Tax involvement or not as the entire gain has been used in the house being constructed.
Thanks
Investment of LTCG in land or plot will not entitle you to claim exemption on LTCG even if entire capital gain is invested in land/plot. The time frame will remain 3 years and you have to complete the construction of house.
The house should be constructed within 3 years. If the construction is not completed the AO may disallow capital gain exemption.
Thanks Nitin,Clears things up.Just one more clarification,in case I buy a flat then it is within 2 years?Thanks!
In case of resale flat it is 2 years and for under construction flat, the construction should be completed within 3 years.
Thanks Nitin.
1. If the amount towards cost of improvements is paid through cheque then you can include in capital gain tax calculation.
2. Home Loan principal can be claimed u/s 80C subject to max limit of 1.5 Lac p.a. You cannot include it in cost of transfer.
I have received advance against sale of property in instalments in financial year 2016-17 but sales agreements was registered in financial year 2017-18. When will the sale be recognized for capital gains purpose – When the funds are received or when the agreement is registered.
The title is transferred through conveyance deed or sale deed. Therefore, for capital gain purpose you may consider date of sale deed.
Sir,
I bought a house property (apartment) in financial year 1983-84. If I sell it in financial year 2017-18, can I treat the fair value as ob April 1,2001. How should I get the fair value for 2001 which will be accepted by income tax department
You may check with the local sub registrar office.
I wish to sell my property and am likely to make a LTCG of about Rs.20 lacs. This I plan to do in the first week of April 2017. I plan to invest the amount gained and earn some profit. I understand my time line for payment of LTCG tax is 2 years – and that means March 2019, Can I pay the tax in 2019 March without any further liability?
It is possible but you have to keep the LTCG in capital gains account.
Thanks for your reply. My question is what if I do not keep the money in capital gains account and instead use it for making normal gains/ profits? But I will pay my taxes within the time frame – ie by March 2018 or March 2019 as per my obligation. I do not want to violate the rule but also use money more efficiently. Is it ok? Please comment.
You can pay the capital gain tax on or before 31st Mar 2018 and use the money as per your wish. Capital Gains account come into picture if you intend to invest the capital gain in some other property. Any unutilized capital gain amount should be deposited in capital gains account on or before last date of filing of ITR.
I have sold a Residential Property on Feb 8th 2017. This property was purchased in Feb 2003 and hence the sale qualifies for Long Term Capital Gain.
I have also booked a new residential house in December 2016. The sale agreement for this property has been registered in the registrar office. Sale deed is not yet done.
I also have a home loan started against this new property and am paying EMI.
My question is I would like to save on Capital Gains Tax , towards my purchase of the new flat under Section 54.
The new house may or may not be registered by July 31 2017 , the date for filing Income Tax returns. However it shall most definitely be registered by September 2017.
Given that my sale agreement is already registered, my query is can I claim Long Term Capital Gain benefit immediately towards the new property by making a payment to the Housing Finance company.
Do I need to wait for the sale deed to be registered. If so I shall have to consider opening a LTCG Account in a bank in the event that registration moves beyond July 2017. I would preferably like to avoid opening an account given the dates mentioned.
Please advice
In your case, the under construction property should be completed within 3 years from the sale of existing property. You can clear your home loan from capital gain and claim capital gain exemption. Any untilized capital gain as on July 31, 2017 should be deposited in capital gains account.
Thanks Mr Nitin. Very much appreciate your advice. I shall proceed with the home loan repayment based on sale agreement which is already registered.
My query is that are there any restrictions as to number of properties one owns at time of claiming LTCG?
For instance I am the owner of a house A and also of a flat B, i.e. I have 2 properties to my name.
I plan to sell the house A in the near future and then buy a residential property C within 3 years of date of sale to minimise the Capital Gains Tax.
Thus at time when I will be filing for exemption for LTCG on sale of house A, I would be the owner of Flat B and also newly acquired Flat C.
You should not own or hold more than one property (other than the new property) on the date of sale or purchase.
Mr Nitin
I sold land in May 2 2014 , invested cap gains by feb 2015 , booked a new under construction flat in March 2015 . I have utilised 75% of cap gains in payments to builder till feb 2017.
My query is till when is last date by which 100% cap gains to be utilised i.e May 2 2017 or
july 31 2017 (itr filing last date AY 2017-18) OR March 31 2018 (ay 2018-19)
what happens if I cant utilise 100% cap gains before last date considering flat handing over is BY END OF MAY 2017
For under construction property, the capital gain should be invested within 3 years i.e. till 1st May, 2017. If the construction is not completed then the capital gain exemption will be reversed and you need to pay capital gain tax.
Dear Esteemed Sir
,
I am in CA Final level and i read your amazing article on Capital gains. I have a doubt and i would be very grateful if you can help me.
Suppose I am purchasing a new house today for Rs 1 Crore with payment schedule as follows
Mar 2017 5 % i.e 5 lakhs ( I get agreement signed with builder here and get it registered)
Mar 2018 5% i.e 5 Lakhs
Mar 2019 5% i.e 5 lakhs
Mar 2020 85% i.e 85 lakhs
In Mar 2020, I sell a property where i make 1 crore profit and i pay 85 lakhs out of this profit. Will i get capital gains exemption for this amount. My doubt is since purchase should have been before 1 year of transfer of asset while I purchased on Mar 2017.however your article states a beneficial interpretation will allow me to have this exemption. Kindly clarify? Also since i made a profit of 1 crore can i take entire 1 crore as i have actually purchased a house of 1 crore
Thanks
Amit
Please check my following post for more details
https://www.nitinbhatia.in/real-estate/under-construction-property-capital-gain/