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capital gain: Reinvestment

01 June 2010

Someone sells property which can be used as commercial and residential either purpose. For last 3-4 years, it was not used at all as either, but before that, it was used as a commercial.

While selling such property, there is a capital gain. If person buys some commercial property out of sale proceeds, can that be considered for claiming exemption under capital gain reinvestment?

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6 Replies

CA Manoj Tilokani (JOB) (163 Points)
Replied 01 June 2010

YES EXEMPTION WILL BE ALLOWED. BUT I M NOT CENTPERCENT CONFIDENT ABOUT THAT.

kantijain (Chartered Accountant in Practice) (385 Points)
Replied 01 June 2010

Dear Rakesh & Manoj,

Based on the facts provided by you, the only possible exemption is exemption u/s 54. However even this exemption is subject to various conditions, important ones being:

1) the asset sold should be long term capital asset being a building or land appurtenant thereto;

2) it should be a residential house chargeable under the thead "Income from House Property";

I request u to go through sec 54 of the Act (if u r not having act, let me know i will mail u) and come to the final conclusion on ur own.

Regards

Kanti Jain

C.Balaji (Learner) (1867 Points)
Replied 01 June 2010

Dear Friends....

As per Sec 54, exemption will be allowed only when the asset transfered is a Long term Asset..

Sec 54 - Transfer of Res. house and Purchase / Construction of RESIDENTIAL HOUSE...

Since in the above case the assessee buys commercial property it does not qualify for exemption u/s 54..

I dont think any exemption will be available if it is invested in Commercial property...

The entire CG will be taxable...

correct me if i m wrong....

CA Deepak Joshi (TaxTalk) (178 Points)
Replied 02 June 2010

I second Balaji's opinion... no exemption u/s 54....due to the purchase of commercial property..

kantijain (Chartered Accountant in Practice) (385 Points)
Replied 02 June 2010

Dear rakesh,

I hope ur query is clarified or else provide us the additional details to furhter probe into it.

Regards

Kanti Jain

Reddy (MD) (22 Points)
Replied 16 April 2012

Hello, I have about 4 residentially classified properties. I sold one residential land(not the one I am living in today) and looking to save on the capital gains tax. This land was purchased in the early 90s and sold recently in 2011 mid

The options I have to save on taxes are

1) invest in an apartment for over capital gains amount

2)invest in another land and construct a small house property (Should I physically live in that property?)

3)Buy a land with house for over capital gains amount

Will I save tax by any one these means per section 54. How long should I hold these properties?

I am out of time to invest in Bonds and hence that is not an option. If I have to put that capital gains in that Governement savings account till I find an investment should I invest before the tax filling(ie July)? Should I put only capital gains amount or entire sale proceeds?

All help is appreciated as I am extremely confused.

Thanks