Capital Gains Tax on Land Sale Capital Gains Tax on Land Sale

2 years ago

Hi,
I bought a land in the FY2016-2017(Jul-2016) from 5.3 Lakhs and sold it for 11.3 Lakhs in FY 2020-2021(Feb-2021), so the capital gains tax will be on the profit I gained which is around 5 Lakhs considering the indexation. I purchased an apartment in 2019 for which I got the sale agreement in July-2019 and its possession is the end of 2022, I have been paying the builder as and when they raise the invoices(bank pays 75% and I pay 25% for every invoice), I almost paid 18 Lakhs from my own money to builder.
Is it considered as an exemption for capital gain tax? If not what other options do I have?

Abhimanyu Shandilya

Responded 2 years ago

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A.As per the Section 54 of the Income Tax Act since you have already put the money into another residential apartment the question of capital gain should not arise any more. But still to be on a safer side you are advised to be in touch with your CA and close this for ever.

Section 54. Profit on sale of property used for residence.—2[Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset 5 ***, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head ―Income from house property‖ (hereafter in this section referred to as the original asset), and the assessee has within a period of 6 [one year before or two years after the date on which the transfer took place purchased], or has within a period of three years after that date 7 [constructed, one residential house in India], then], instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,—
(i) if the amount of the capital gain 8 [is greater than the cost of 9 [the residential house] so purchased or constructed (hereafter in this section referred to as the new asset)], the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or
(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45;and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain. 10* * * * *
11[(2) The amount of the capital gain which is not appropriated by the assessee towards the purchase
of the new asset made within one year before the date on which the transfer of the original asset took
place, or which is not utilised by him for the purchase or construction of the new asset before the date of
furnishing the return of income under section 139, shall be deposited by him before furnishing such
return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139]in an account in any
such bank or institution as may be specified in, and utilised in accordance with, any scheme which the
Central Government may, by notification in the Official Gazette, frame in this behalf and such return
shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if
any, already utilised by the assessee for the purchase or construction of the new asset together with the
amount so deposited shall be deemed to be the cost of the new asset:
Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the
purchase or construction of the new asset within the period specified in sub-section (1), then,—
(i) the amount not so utilised shall be charged under section 45 as the income of the previous
year in which the period of three years from the date of the transfer of the original asset expires; and
(ii) theassessee shall be entitled to withdraw such amount in accordance with the scheme
aforesaid.
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Anik

Responded 2 years ago

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A.Hi,
The exemption on two-house properties is allowed once in the lifetime of a taxpayer, provided the capital gains do not exceed Rs. 2 crores as mentioned u/S 54, 54F of the Income Tax Act. You can check with an accountant to see whether you are eligible or not.
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Ayantika Mondal @ Prime Legal

Responded 2 years ago

A.Hi,
The exemption under section 54 of the Income Tax Act is available when the capital gains from the sale of house property are reinvested into buying or constructing two another house properties. You may get in touch with a CA to get a detailed way to exempt yourself from taxes.
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Kishan Dutt Kalaskar

Responded 2 years ago

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A.Dear Sir,
It is better to consult a chartered accountant.
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