capital gains tax

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Querist : Anonymous

Querist : Anonymous (Querist)

17 March 2011 I had bought a flat in July 1994 for Rs 85000.Now i am selling it in App. Rs 10 lakhs.I intend to repay my housing construction loan taken for a new property out of this amount for which construction was started in August 2008 and completion certificate issued in Nov.2009.
What are my capital gains tax liabilities?Can I claim exemption for repaying housing construction loan as I was relying on the sale proceeds of this house to pay for construction of this new property.

Sunil Kr. Sanganeria

Sunil Kr. Sanganeria (Expert)
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17 March 2011 You have to pay tax on the sale of house property. Since the property is held for more than 36 month. The profit will be long term.

You will not get deduction u/s 54 from the long term gain for purchase of new Property because as per section 54 of the IT Act property within a period of one year before th etransfer or within two years after the date of trasfer.

In your case, suppose you sell property on 17th March 2011, the date of purchase of new house should not be prior to 16th March, 2010. But you purchased in Nov 2009

Querist : Anonymous

Querist : Anonymous (Querist)

17 March 2011 Dear Mr.sanganeria,
Thanks a lot for your valuable advise but my point is that I wanted to construct the new property by the sale proceeds of house in question.However since I could not get a suitable deal, I obtained loan from bank and as soon as the property was sold I repaid the loan.So the sale proceeds are effectively used for construction of new house.
Moreover unlike the purchase, in case of construction no fixed date can be assumed on which construction was over.In fact full and final payment of contractor is still pending and I intend to settle it within next 3 months.
I look forward to your as well as other member's considered opinion.
Regards!

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