Taxation

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

09 December 2014 I sale my old property(shop) at Rs.5500000/- where nothing doing since 12 year and purchase immediately new property (House)at Rs.5800000/-. what is the tax procedure?

CA PARTH SHAH

CA PARTH SHAH (Expert)
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20 December 2015 Please give full details of Purchase cost of shop you purchased 12 years ago. Then only I can give proper answer

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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26 July 2025 Based on your query, here’s a clear explanation of the **tax implications and exemptions** available under the **Income Tax Act, 1961** for your **property transaction**:

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### ✅ **Situation Recap:**

* You **sold an old shop** (held for 12 years) for ₹55,00,000
* You **immediately bought a new residential house** for ₹58,00,000

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### 📌 **Step-by-Step Tax Treatment:**

#### 1. **Nature of Capital Gain**

Since the shop was held for more than **36 months**, it's a **long-term capital asset**, and the profit is subject to **Long-Term Capital Gains (LTCG) tax**.

#### 2. **Calculate LTCG:**

LTCG = **Sale Price** – **Indexed Cost of Acquisition** – **Expenses on Transfer (if any)**

> You haven’t mentioned the purchase cost of the shop, so the exact gain cannot be computed. But let’s assume the capital gain is **₹X**.

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### 🏠 **Section 54F – Exemption on LTCG**

As you sold a **non-residential property (shop)** and purchased a **residential house**, you may claim exemption **under Section 54F**, subject to conditions:

#### ✅ **Conditions under Sec 54F:**

1. Purchase of **1 residential house** in India **within 1 year before or 2 years after** (or construct within 3 years)
2. Do **not own more than 1 residential house** (other than the new one) on the date of sale
3. The **entire net sale consideration** (₹55 lakhs) should be invested in the new house

#### 🧾 **Exemption Allowed:**

If **entire ₹55 lakhs** is reinvested in the new house (₹58 lakhs), **full exemption** is allowed on capital gain.

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### 🔁 **Result:**

* ✅ If you meet the Sec 54F conditions → **LTCG is exempt**
* ❌ If conditions are not met → LTCG will be taxed @ **20% + cess**

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### ⚠️ Additional Notes:

* If exemption is claimed but the new house is **sold within 3 years**, the earlier exemption will be **reversed** and taxed in that year.
* Ensure that the **sale and purchase details** are well documented (registered deed, payment proof, etc.)

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### 💡 Recommendation:

You should compute the **Indexed Cost of Acquisition** using **Cost Inflation Index (CII)** and consult a tax advisor or CA to file your return correctly and claim the **54F exemption**.

Would you like help calculating the capital gain if you provide the original cost and year of purchase of the shop?

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