Capital gain query

Tax planning 477 views 3 replies

Mihir

Wealth Manager

5293 Points Joined December 2008

I have two separate question

1) An individual sold his flat and wants to repay his housing loan on another flat. But he does not want to repay immediately. He wants to invest a part of the sale proceed in a short term project, recover the invested amount after a period of 6-8 months and then repay the housing loan within the same financial year. Can he save capital gain tax by repaying a housing loan after using the money for some other purpose and then repay the housing loan in the same financial year? Thanks

2) An individual has been given a proposal of accepting 'x' amount for reliquishing his rights in a flat in which he is 50% nominee by virtue of a society nomination form as well as un-probated will. He refused and a civil suit was instituted against him. Now he has agreed an out of court settlement. Does he have to pay capital gain tax on the sum received for relinquishing his rights in the flat through a settlement deed? I heard that sum received via a settlement deed from a court is exempt from capital gain tax. Thanks

Replies (3)

Ankit

C.A.-Student

680 Points Joined March 2007

1) sale proceed of one house can be invested in approved/notified/specified scheme/bonds with investment period changes ranging from 3-5yrears but in any case ,investment period is not 6-8months

whether person invest in approved scheme or not for 6-8 months any income earn will attract tax

Even if person does not invest anywhere and pays loan whether partial or fully then also he will not get any saving in tax/benefit except specified u/s24 and u/s80C

2) individual has to capital gain tax on relinquishing his title.

I havenot heard about exemption in case of settlement deed of court and i doubt this condition exist.

But still if exist you have a proper backing and full knowledge of it and dont rely on some information that you may heard

CA Tushar Singhania

Asst. Manager Accts & Fin.

402 Points Joined June 2011

B) ask your client to buy a new house property or to invest it in NHAI Bonds for 3 years, this will give him exemption U/S 54 & 54EC. Even after repaying the home loan he isable to buy a new house by getting a new loan he will be eligible for deduction under the said section. the routing of the money is not important. what matters is the investment

Sorry cant help wih 2nd question. will need a case law to substantiate the claim. altthough in my personal opinion is no form income is exempt unless specified by IT Act

Mihir

Wealth Manager

5293 Points Joined December 2008

Thanks Ankit, Thanks Tushar,

That means, to avail exemption from capital gain tax, one is required to invest in a residential flat or 54EC bonds. Repaying a housing loan will not give him exemption from capital gain tax, right? Now if he decides to invest in another residential flat after a period of say 8 months, can he invest the same in a short term project for 6 months, or does he necessary have to deposit in capital gain account of SBI?

Thanks again.