Purchase of house property before selling old property

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CA HAYEDAR SHAIKH (Querist)
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14 May 2016 Dear Sir,

If an assessee buy house property before one year from date of sale, does it qualifies for Capital Gain tax exemption?

For Example
Mr. A has purchased house property for Rs. 9 lakhs on 31/10/1991.
He has sold the said property on 30/09/2015 for Rs. 90 lakhs.
But he purchased new house property for Rs. 1.20 crores on 29/03/2015 and the agreement is done on this date but the payment is made after sale of old house property.

Can he still qualifies for the exemption from capital gain? Your advice with the supportive case laws is welcomed.

Your advice is valueable for me.

Anurag Sharma

Anurag Sharma (Expert)
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15 May 2016 Under section 54 of the Income tax Act, 1961, a person saves Long term capital gains tax if he purchases a residential house property (new property) within either ONE year before or TWO year after the date of sale of old property. In your case though you made an agreement to purchase before sale of old property, actual sale or transfer of title must have been done after you made full payment to seller. Actual purchase would be after date of sale and would be eligible for long term capital gain exemption. Even if it is considered that you purchased the new property before sale of old property, you will still be eligible for exemption as the purchase is within one year before from the date of sale of old property. Section 54 is very clear. No case law is needed.

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