Re investment of capital gains on sale of land

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Subair (Querist)
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26 November 2019 Where I can invest the gains out of a residential land property sale. There is no house in the plot. Whether I can re invest to buy a House or Flat? How to get 20% tax relief?

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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26 May 2020 Exemptions from your Gains that Save Tax
Section 54F (applicable in case its a long term capital asset)
If you are using your entire sale proceeds to buy a house property you may end up paying no tax on your gains when – You satisfy all these conditions

(a)Purchase one house within 1 year before the date of transfer or 2 years after that

(b) Construct one house within 3 years after the date of transfer

(c)You do not sell this house within 3 years of purchase or construction

(d)This new house purchased or constructed must be situated in India

(e) You should not own more than 1 residential house (other than the new one) on the date of transfer

(f)You do not purchase within a period of 2 years after such date or construct within a period of 3 years after such date any residential house (other than the new one).

When you satisfy these conditions and invest entire sale proceeds towards the new house – you won’t pay any tax on your gains. However, if you invest a portion of the sale proceeds, the exemption will be the proportion of the invested amount to the sale price or exemption i.e cost of new house x capital gains/net consideration.

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