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Ltcg exemption under section 54

Jaya (Others) (72 Points)

27 July 2015

Dear Experts,

I paid a booking amount for a new flat on May 2015 and the sale agreement will be done in August 2015.
The construction will be completed by Aug 2018.

Now I am planning to sell my old flat which I bought on 2000 and invest the LTCG in the new flat that I have booked.
I am trying to understand tax exemption on LTCG under section 54.

1. Is it possible to sell my old flat and invest the LTCG in the new flat that is booked ?

2. IS that can be done by what time frame should I sell the old flat and re-invest the LTCG to claim IT exemption.

3. Is there any other requirement that I should meet to claim this excemption under section 54?

Please clarify.

Thanks,
Sujitkumar

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5 Replies

Rajagopalakrishnan R (PARTNER) (1417 Points)
Replied 27 July 2015

Point wise reply

1. Is it possible to sell my old flat and invest the LTCG in the new flat that is booked ?

YES, you can.

2. IS that can be done by what time frame should I sell the old flat and re-invest the LTCG to claim IT exemption.

The new flat construction must be completed within 3 years of sale deed date of old flat. I fit is outright purchase it must be within 2 years

3. Is there any other requirement that I should meet to claim this excemption under section 54?

Yes, the amount of LTCG which is not invested in the new flat as on 31st July 2016. (i.e due date for the return for AY 16-17 corresponding to current FY), must be deposited in a special bank account called Capital Gains Accounts Scheme 1988. This is available with all banks. Any amount remaining unutilsed in this account at the expiry of the three years will be taxable as capital gains in that year.

Udgam Koomar (Tax Technologist) (1949 Points)
Replied 27 July 2015

You should purchase new house property within a period 1 year before or 2 years after the date of sale of property.The new property should not be transferred within 3 years from the date of purchase. If the you transfers the property before 3 years, the capital gain exempted shall be reduced by the cost of acquisition of new property and short term capital gain shall be levied on that amount.

CA G. SURYANARAYANAN (CHARTERED ACCOUNTANT) (316 Points)
Replied 28 July 2015

Death reference to Sri Rajagopalakrishnan's clarification: Sir, I have to invest in new house property within three years. Is it enough if I start the process and pay stage by stage? Suppose only 50% of the amount is paid before 31st July 2016, and further instalments are due in quick succession, shall I have to go for deposit in CGAS?

CA G. SURYANARAYANAN (CHARTERED ACCOUNTANT) (316 Points)
Replied 28 July 2015

Sorry, it should be read as "with reference".

Tarun (AM) (216 Points)
Replied 28 July 2015

3 uears are 1 year before the sale and 2 yeaars after. You may do invest money in stages but it should be completed within 2 years of sales and u must hold possession within that time span.