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Capital gain exemption - help needed

Moorthy (Proprietor) (30 Points)

02 November 2012

Hi, Regarding Captial gain exemption I need some help. For example my sale value of the property is Rs.1.5 Crore (2012-203), my purchase value of the same property is about 85 Lakhs (2007-08) includes indexation value. Now for example approximately the Capital Gain Tax comes about 65 lakhs. I plan to purchase the property about 85 Lakhs. Now my question is either I have to purchase the house for the entire sale value of 1.5 Crore only shall I get exemption of 65 Lakh or any other calculation?, or else how much i get exemption for the above new purchase value 85 Lakhs. My clear question is if i purchase 85 Lakh worth property I get exemption of 65 Lakhs or part only, if part then how much?. Thanks in advance.

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8 Replies

Anil Sankar V (CA) (1877 Points)
Replied 02 November 2012

Sir,it deals with a lot of issues.

sir,if u have any other house then computation will change.

the following matters deals with sec.54,54F

CA Bhargav Nathwani (CA in Practice) (8307 Points)
Replied 03 November 2012

FIRST OF ALL GIVE FULL INFORMATION. what are you selling. Is it your Residential House Property ?

Aditya Kumar Narayan (CA Finalist) (84 Points)
Replied 03 November 2012

in case it is residential property-

Since your case is a longterm capital gain,the maximum amount exempt will be 65 lacs,but this amount

must be used in the purchase of another residential house within 2 yrs after sale of old house or 1 yr before sale of old house or 3 yrs in case the new house is to be constructed.

thus,to claim full exemption u must purchase a residential house worth more than 65 lacs and the holding period of the new house should be more than 3 yrs otherwise the capital gains of the new house

and old house will be considered as short term capital gains and taxed accordingly.

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Moorthy (Proprietor) (30 Points)
Replied 03 November 2012

Bhargav Sir, Yes, I am selling residential house only. i purchased about 3 years back, if i sell now after index cost about 65 lakhs capital gain coming. The entire sale consideration is 1.5 crore, now i saw one new residential house, the new residential house cost is about 85 Lakhs. I have doubt that either i have to purchase new residential house for full amount of 1.5 Crore or shall i get exemption of this capital gain of 65 lakh when purchase this new house for 85 lakh?

CA Bhargav Nathwani (CA in Practice) (8307 Points)
Replied 03 November 2012

yes,you get exemption of 65 lacs but do remember there is "lock in period" for next 3 years. You can not sell this new purchased property for next 3 years otherwise your exempted CG taxable.

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Moorthy (Proprietor) (30 Points)
Replied 03 November 2012

Thank you Bhargav, yes, its for my own use only i am going to purchase (new property), the new property is residential vacant plot in chennai main place, the cost is 85 Lakhs, now i plan to purchase this property and start construction, i finish the construction in next 1 year maximum., is this ok? if yes, how i do my account. I mean after get sale amount of 1.50 crore, i give cheque to this new party for 85 Lakhs, i think now my capital gain problem over, then i start construcion, you please tell me shall i use the remaining amount from 1.50 crore (after 85 Lakhs) for other purpose like to close my existing loans, thanks in advance.

Komal Sharma (Assistant Accountant) (1887 Points)
Replied 03 November 2012

Yes you will get exemption only of 65 Lacs, your case falls under Sec 54 Of income Tax Act, 1961, but the condition is that u have to use your amount for the purchase of new residential property and you can use the remaining amount except Capital Gain wherever you want.

CA Bhargav Nathwani (CA in Practice) (8307 Points)
Replied 03 November 2012

Ya you can construct your House property for next 3 Years. So Regarding this issue you dont have any issue becoze your construction finish within 1 years.

And Regarding your 2nd Question. How many Ruppe of your Loan amonut and Installment. If there is provision in your loan that if you paid your loan early and get exemption in interst payable then you can pay your loans. Otherwise you can pay your fix Installments and Invest in Tax free Sources.

See other many ways to manage your portfoio that may be more beneficial.

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