Capital gains on purchase before sale

Tax queries 791 views 2 replies

Yash

none

24 Points Posted on 13 August 2012

If I buy a new flat in Aug 2012 (purchase of land and agreement for construction of flat with builder - is the typical procedure) taking a loan and then sell 2 properties before Aug 2013 and use all the capital gains to close the loan on the new flat before Aug 2013 - can I get exception from capital gain tax? New flat construction will complete by Dec 2013

My auditor is saying that I cannot? :(

Can the experts please clarify?

Capital gain arising from sale of above said property will be saved up to the amount used in to

1. purchase a residential house within year before the date of transfer of old house or within two year after the date of transfer of old house.or

2. construct a house with in three year from date of transfer of old house property.

Replies (2)

Pramod Limaye

Chartered Accountant

172 Points Posted on 13 August 2012

I think you should be able to get exemption from capital gains since you are fulfilling the condition of construction of house within 3 years. Please ask your auditors why he says no and post his reply here.

U S Sharma

glidor@gmail.com

21068 Points Posted on 13 August 2012

when the new property is going to be completed by dec 2013, avoid loan and transfer the value of sold properties direct to seller of new property, as the "loan and repalyement" are not as per nexus of the capital gain exemption, so the ITO may reject your claim at 1st instance.