Capital gains on selling vacant land

You can claim exemption U/S 54 F

Section 54F

The Income Tax Act, 1961 grants exemption of capital gains arising from the transfer of a long-term capital asset other than a house property under section 54F. Conditions –

The assessee is an individual or a Hindu Undivided Family (HUF).

The asset transferred is any long-term capital asset but other than a residential house.

The assessee has purchased, within one year before the date of transfer or two years after the date of transfer or constructed within three years after the date of transfer (or from the date of receipt of compensation in the case of compulsory acquisition), a residential house (hereinafter referred to as “new house”).

The assessee should not sell or transfer the new house within three years of its purchase or construction.

 The assessee should not own on the date of transfer of the original asset more than one residential house (other than the new house). He should also not purchase within a period of two years after such date or construct within a period of three years after such date any residential house whose income is taxable under the head “ Income from House property”(other than the new house).

thanks Mr. Aryan  True answer.

Ramanuj

You can avail section 54F as suggested by Mr Aryan.

The sale proceeds from the sale of the plot can be deposited in capital gain deposit account and the invested in another property within a period of 2 years. You can even invest in infra bonds within 6 months. 

This will reduce or eliminate your tax liability from the sale of plot. 

Agree with Mr. Mihir,

Exemption U/S 54F or Exemption U/S 54EC or both can be claimed..

However, Exemption is subjected to some conditions under 54 EC are as follows:

1. Investment into these bonds save long term capital gains.

2. It is locked in for 3 years.

3. Demat account is not compulsory to invest in these bonds.

4. Currently REC and NHAI issue such bonds.

5. Rate of interest from these bonds are 6% pa and paid out every year.

6. TDS on the interest payable will not be deducted.

7. Remember the yearly interest earned is taxable under the head of income from other source.

8. The maximum cap for the investment is Rs. 50 lacs.

9. The Bonds are non-transferable, non-negotiable and cannot be offered as a security for any loan or advance.

Whether exemption u/s.54F will be available if the residential house property is bought outside India within the specified period?

Thanks in advance

Hello, Neeraj

The exemption of the capital gains tax (CGT) under Section 54 and 54F only applicable if you purchase a new residential house in India.