Capital Gain Section 54 Exemption Withdrawal

This query is : Resolved

Ankur Aggarwal (Querist)
Follow

10 July 2024 Hi,
I have a query regarding capital gain on residential house property (RHP).
Suppose I sell my RHP1 that I bought in FY 2018-19 for 30 lakhs, for 80 Lakhs in FY 23-24. The LTCG from this comes out to be approx. 43 Lakhs.
Now I buy a new RHP2 in FY 23-24 itself for Rs. 60 Lakhs and take exemption under section 54 for complete 43 Lakhs. 54 Condition is to hold onto RHP2 for 3 Years and construct it.

1. Suppose I get a good opportunity and sell RHP2 in FY 24-25 for say 85 Lakhs. The exemption under section 54 will be withdrawn. The capital gain on RHP2 will be short term of approx. Rs. 68 Lakhs. So i have to pay short term capital gain tax on Rs. 68 lakhs.
A) Do I need to pay any tax on the initial capital gain withdrawn of 43 Lakhs?
B) Do I need to pay any interest as the initial LTCG of 43 Lakhs arose in FY 23-24, but was now deferred and now being payed in FY 24-25?

2. Suppose I get a good opportunity and sell RHP2 in FY 27-28 for say 85 Lakhs after holding it for more than 2 Years but less than 3 years. The exemption under section 54 will be withdrawn. The capital gain on RHP2 will be long term of approx. Rs. 68 Lakhs. So i have to pay tax on long term capital gain on Rs. 68 lakhs.
A) Do I need to pay any tax on the initial capital gain withdrawn of 43 Lakhs?
B) Do I need to pay any interest as the initial LTCG of 43 Lakhs arose in FY 23-24, but was now deferred and now being payed in FY 27-28?

I know it is a bit extensive. Thanks for your help in advance.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
Follow

10 July 2024 1. A) No. B) No.
2. Same as above...

Ankur Aggarwal

Ankur Aggarwal (Querist)
Follow

10 July 2024 Also sir, in first case I will be in a bit of loss, as on 43 Lakhs now i have to pay STCG Tax, while before i was able to pay LTCG on it.
Is it advisable so to hold the new RHP2 for atleast 2 years?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
Follow

10 July 2024 Yes, whereby you get chance to reinvest the total LTCG u/s. 54 IT act.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
Follow

26 August 2024 Good Luck.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now