Capital Gain on Sale of Residential House

Tax queries 1448 views 2 replies

Sanjay

Service

24 Points Posted on 03 November 2008

I have purchased a Residential Flat in Pune on June 2005 for Rs. 750000/- from Developer on Myself and Wife’s name, I have availed a loan of Rs. 6 Lacs on my name from ICICI Bank.

In February 2008 I have purchased another flat in Pune on both of us name for Rs. 19 Lacs made a down payment of Rs. 5 Lacs and Rs. 14 Lacs loan availed from LIC Housing Finance.

Now I wish to sell flat purchased in June 2005 for Rs. 30 Lacs.

Kindly suggest the implication of above transaction:-

1. If, Income Tax is applicable on the realization of Residential House Property.

2. Is exemption of Section 54 is available in above case.

3. If, income tax is applicable then on what amount.

4. In Balance amount can I purchase a Commercial Property.

Replies (2)

indu nagar

36 Points Posted on 03 November 2008

Mr. sanjay,

Following are the submissions for your query:

1. Long term Capital gains(LTCG) shall arise to you on this sale and income tax shall be paid on such gains.

2. Exemption of section 54 shall be available, on the basis of residential property purchased in feb 08. (only if you sale this property by feb 09).

3.First, you are required to calulate the LTCG. If the LTCG is not more than cost of new house(i.e rs. 19 lacs) than the difference shall be charged to tax and if LTCG is less the cost of new house then whole LTCG is exempt.

4. for the balance amount you can not buy a commercial property since gains can be invested to buy only ONE RESIDENTIAL property.