Investment of Capital Gains in purchase of flat in under construction building

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Shrikant V (Querist)
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26 September 2022 I intend to purchase a flat in a high rise building. The building construction is expected to take 5 years. 30% of amount is payable upfront. 70% of amount is payable after 5 years at the time of taking possession. I will be raising funds for initial 30% by selling equity shares and equity mutual funds on which I will be accruing LTCG. I will investing total consideration from sale of equity shares and equity mutual funds for initial 30% payment towards the said flat within a period of 2 months of accruing LTCG and intend to claim capital gains tax exemption under section 54F in the current FY. After 5 years, for the payment of balance 70% of amount at the time of taking possession, I will be selling my current residential flat after 5 years and invest the total consideration for purchase of the new flat within 3 or 6 months of sale of current residential flat. I will be accruing LTCG on sale of current residential flat after 5 years. In the 5 year hence FY, I intend to claim capital gains tax exemption under section 54. My question is arising from the fact that, since the building will take 5 years to construct and then become ready for possession, can I claim capital gains tax exemption under section 54F in current FY for initial 30% payment and also for the balance 70% payment under section 54 in five years hence FY?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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27 September 2022 Claim of capital gains tax exemption under section 54F in current FY for initial 30% payment is okay.
Section 54 exemption can't be claimed for a purchase made before 5 years.

Shrikant V

Shrikant V (Querist)
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27 September 2022 Thank you for your clarification. So what is the effective date for purpose of exemption of capital gains - is it only the date of agreement for sale which is current FY? Is there any significance of the date of possession which is five year in future from capital gains exemption perspective?

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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28 September 2022 It's the allotment date.

Shrikant V

Shrikant V (Querist)
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28 September 2022 Thank you for your explanation

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