Capital gain related clarification

17 LK YOU HAVE PAID OUT OF UR OWN FUNDS .So out of 35 lk 17lk is used up 

17lk out of 35lk should be claimed  u/s 54..  Rest amt  ( 35- 17) should be used to pre pay the loan and claim exemption 54. 

Gain part should be kept in CGAS [capital gains accounts scheme] of any PSU bank. 

One year b4 and two years after selling the House you have to purchase new House to claim exemption u/s 54.  

@ Anupam: 

Could you please provide more details like date of purchase of flat and sale of property (presuming flat and property were 2 different assets, otherwise no indexation can be considered since it would be a STCG as it was purchased in June 2015)

Also if they were 2 different assets, was the property sold, a residential house or any other property.

If it is residential house then you can claim an exemption u/s 54.

Quantum of exemption u/s 54 will be:

If cost of new residential house >= CG, entire CG is exempt

If cost of new residential house < CG, CG exempt is to the extent of cost of new residential house

Needless to say, cost of the house could be owned and borrowed both. In the present case, cost of house is > CG, hence entire exempt.

If it is any other asset other than a residential house AND there is no residential house at the time of sale of asset, then claim exemption u/s 54F

Quantum of exemption u/s 54F will be:

If cost of new residential house is >= Net sale of the asset, entire CG is exempt

If cost of new residential house is < Net sale of the asset, CG exempt is to the extent of (LTCG x Cost of residential house) ÷ Net SaleConsideration is exempt u/s 54F

In the present case, cost of house is > net sale consideration, hence entire exempt.

Check out which is applicable to you and work accordingly

Hi,

Thanks for such detailed explanation.

It is a residential property purchased in 1990 and the new residential property is purchased in Jun 2015.

The cost of new property is more than the capital gain, but I need to confirm that my contribution is 17 lacs from own fund and the capital gain is 35 lacs.

So will there be any tax on remaining 18 lacs or shall I pay 18 lacs towards home loan to get the exemption?

You can keep in LTCG bonds such as NHI or REC bonds. These bonds will carry interest of 6.25 % . These bonds will be locked for three years. so you can claim exemption under 54 and 54Ec simultaneously

In my opinion it is better  to Pre-Pay the Loan. It is like funding the principal.

Paying Principal of borrowed loan for a particular Property ID XYZ is as good as funding for House XYZ.

You need to ask a CA regarding this. 

I already replied, in your case nothing is taxable and entire amt of CG gets exempted. My question on applicability was wrt section 54 or 54F. 

Now since both were residential prop, claim exemption u/s 54.

Also you can repay your entire loan as the cost of asset meets the requirement of exemption claimed. (Presuming 17 lacs were paid out of funds other than sale of asset i.e. purchase of asset took place first and then sale of asset took place and you would ve having 60 lacs else only 43 lacs can be used towards repayment of loan I.e. 17 lacs has already been used). Also you can claim deduction u/s 24(b) for interest paid on housing loan and a deduction u/s 80C for repayment of loan.

@ S. Shiroor: 

No point of keeping funds in bonds as Sec 54 absorbs entire CG. Instead the entire funds can be utilised for repayment of loan. 

Depends on his Tax bracket of low 30%  , medium or High 30%.

In my case I chose not to pre-pay as it was perfectly cheaper by paying 10% on home loan 

 One has to work out the economics in detail in a simple spreadsheet and keep on changing the prep- pay principal to be paid in that AY so that the total outgo is the least. It also depends on rented/vacant /self ocupied. In the begining the Int is high and principal is low. but the int component keeps on becoming less and principal keeps on increasing.