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Capital Gain on sale of residential land not residential house/flat etc

VS Vedhagiri (Chartered Account) (96 Points)

25 August 2021

Professionals

My client sold residential land which neither has building or any structure. He bought the same same in 2001-2002 at Rs 48 Lakhs and spent Rs 13 Lakhs for development of the land fit for sale on construction of compound wall and gravelling in 2002-2003,

He sold the land for Rs 2.786 crores in April-2021. He invested Rs 2,50 cr in residential house.

I request professionals to calculate the Capital Gain and advise to go for 54 or 54F of Income Tax

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13 Replies

sabyasachi mukherjee (26130 Points)
Replied 26 August 2021

The dates are important. when the assesse again purchased the residential house?

VS Vedhagiri (Chartered Account) (96 Points)
Replied 26 August 2021

Thanks

He bought the residential house in 21st August 2021

regards

VS Vedhagiri (Chartered Account) (96 Points)
Replied 26 August 2021

Thanks

He bought the residential house in 21st August 2021

regards

v devanathan (Partner of a CA Firm) (132 Points)
Replied 26 August 2021

Long term Capital Gain

Sale of Residential land
Sale date 21st Aug 2021						Rs.
Consideration						2,78,60,000

Net Consideration						2,78,60,000
Indexed Cost of Acquistion & Improvement:
Purchased in 2001-2002	48,00,000	48,00,000	2001-2002	100	15216000
Expenditure
Development exps. In 2002-2003	13,00,000	13,00,000	2002-2003	105	3924762

						1,91,40,762
						87,19,238
Less: Deduction u/s. 54F for Investment in new residential house					25000000	78,24,155
Taxable Long Term Capital gain						8,95,083
Note: 1. For claiming deduction u/s.54F, on the date of transfer, he shall not own more than one house, or shall not purchase / construct another house other than new house.
2. Since the asset sold is residential land, deduction is available only under sec.54F and not under sec.54.

VS Vedhagiri (Chartered Account) (96 Points)
Replied 26 August 2021

Dea Bro

Thanks for your reply. How much he has to invest in Bonds to avoid tax

With best regads

VS Vedhagiri (Chartered Account) (96 Points)
Replied 26 August 2021

You reply is very candid and clear. Please keep it up

v devanathan (Partner of a CA Firm) (132 Points)
Replied 26 August 2021

Thanks for your encouraging feedback. The resultant taxable CG shown in my working of Rs.895083 say Rs 9 lakhs will have to be invested in Sec 54EC bonds to save the LTCG tax thereon.

VS Vedhagiri (Chartered Account) (96 Points)
Replied 27 August 2021

Thanks. In my opinion to avoid tax , he has to invest Rs 28,60,000 being Net Sale consideration Rs 2,78,60,000 as reduced by Investment of Rs 2,50,00,000/-

Please correct me if I am wrong

With best regards

v devanathan (Partner of a CA Firm) (132 Points)
Replied 27 August 2021

For deduction u/s. 54EC, the requirement is to invest capital gain and not consideration. Only Sec.54F requires to invest to the extent of consideration.

VS Vedhagiri (Chartered Account) (96 Points)
Replied 27 August 2021

Thanks for the prompt reply

My client claims exemption under section 54F a

So how much must be invested Rs 9 Lakhs or Rs 28.60 Lakhs

sabyasachi mukherjee (26130 Points)
Replied 27 August 2021

Check the indexation .

v devanathan (Partner of a CA Firm) (132 Points)
Replied 29 August 2021

As you mentioned the investment in bonds, I presume that it is under section 54EC, In such a case, the investment is only with reference to the capital gain ( i.e., 9 Lakhs as mentioned earlier) and not consideration. In this case, you may avail the deduction under Sec. 54F and Sec 54EC together as explained above.