I am selling a residential plot, purchased in 2000. I would like to use this sale proceeds to
construct a house on a different plot that I already own.
However the cost of construction is much more than the sale of my residential plot.
Can I defer the capital gains on the sale, if I use 100% of the sale proceeds in constructing a house?
If so, what's the process for this?
| Originally posted by : CA Raj Doshi | ||
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Within 3 years from the sale, you need to construct a new houseThe amount of capital gains need to be deposited into capital gain account scheme and you need to utilise funds for the construction.Invest in capital gain scheme account before due date of filing return.https://www.charteredclub.com/section-54/CA. Raj Doshi |  |
Do you mean within 3 years, I need to complete the construction or start the construction?
Since the construction cost would be nearly 3 times the deferred capital gains, would I still get the full capital gains tax exemption?
| Originally posted by : sabyasachi mukherjee | ||
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Pls post actual figures. | |
Capital gains would be approx 45 lakhs (plot purchased in 1999 for 2 lakhs and scheduled to sell in April 2023)
Construction cost would be approximately 3 times the capital gains.
| Originally posted by : CA Rashmi Gandhi | ||
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100% exemption allowed u/s 54F if you use complete sale proceeds to construct residential house in next year.You can claim exemption for construction amount til date of return of filing in return. If you want to claim exemption of construction made in future period , then deposit amount in Capital Gain Deposit Scheme. | |
Thanks for your response.
Is the 3 years deadline for starting construction or for completing construction?
Another question is if I sell another property and use the proceeds also for constructing the same property, is this allowed?
The house construction would cost a lot more than the value of the property(ies) I am planning to sell. So, wondering if 'it's possible to use sale proceeds of 2 properties and claim capital gains exemption as well.
No not on the same property.
3 years deadline starts from sale of property. You can use sales proceeds of another house also for constrcution and claim exemption.
What if new property is not build within 3 years, do I need to ay after 3 years
The construction must be completed within three years from the sale of the property.
If you want to use the funds later in the construction, deposit the same in the Capital Gains Account Scheme and use the proceeds within three years. Deposit the funds before the filing of the Income Tax Return to claim the capital gain exemption
Further, entire sale proceeds from the plot sale should be used for the construction to be eligible for a 100% capital gain exemption.
Further, this deduction can only be claimed if you do not own more than one residential house on the date of plot sale.
You need to deposit the amount in capital gain deposit account if you want to claim exemption in further period. Any amount not utilised after expiry of three years same is taxable in your hands.
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