Capital Gains Tax


A house built in 1977 was sold in May 2008.Out of the sale proceed some money was utilized to buy a residential plot in Nov 2008. No house has been built on it yet.  No capital gain tax was paid as after indexation the capital gain calculated was invested in the residential plot. Now I want to sell this plot and  purchase a house instead . What shall be the treatment for the previous capital gain  and the current capital gain.  Shall I have to pay tax on the transaction done in May 2008, since the house has not been built  within a period of three years

Replies (1)

Dear Sir,

If you sell this plot now, then this will result into  Short Term Capital gain since period of holding is less than 3years, hence gain cannot be claimed exempt by acquiring new house...

Further the gain which was exempted in MAY 2008, will  become taxable during FY 2011-12.

So not advisable from Taxation point of view.

I would say -

For Transfer of House in May 2008 - U can still construct a House on the plot acquired in Nov 2008. Construction should be completed Till May 2011.

Then capital gains shall remain exempt + U have to hold this new house for 3 years from May 2011.

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