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Querries related to capital gain tax by selling property

Ashish (dsfds) (25 Points)

09 September 2014

I had purchased a property in 2007 and wanted to sell it now. As it has completed more than 3 yrs , I need to pay long term capital gain tax . I have clear my homeloan on this property.
I am planning to purchase new property currently (immediate) and taking Home loan for the same. Meantime I will sell my old property in next 3 to 6 months.
Can i get exempt from capital gain tax , if I used that money to deposit it my new home loan.
In short I am selling my older property in next 3 to 6 months and purchasing new property in next month. I want to reduce my homeloan of new property by depositing the money got from selling old proerty and as well get exempt form capital tax. Is this possible?

Thanks,

Ashish

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4 Replies

Ishaan (CA Final student) (36 Points)
Replied 09 September 2014

Yes it is possible. You will get exemption for the amount of capital gain used to purchase new residential property. If you use whole amount of gain then you will be fully exempt else you will only be liable to pay capital gain tax on the amount of capital gain not utilised for purchasing new property.

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Jithendra kumar (Practising Chartered Accountant) (50 Points)
Replied 09 September 2014

Agreed with Ishaan.

Ashish (dsfds) (25 Points)
Replied 09 September 2014

Thanks Ishaan and Jithendra.

I am planning to put entire amount recieved from selling my old property into new home loan.

The only confusion I have now is , I am purchasing new property before selling older one. I am taking home loan for new property and I am planning settle to this homeloan in next 6 months by selling my old property. Does Govt allow this way to exempt from capital tax gain.

I am aware the normal rule where you sell your old property first and whatever money you get you invest in new property later to get exempt from tax gain. I am trying to do reverse, purchase first with homeloan and sell later and then try to get exempt from capital gain.

Joswin Punchakunnel (Chartered Accountant) (314 Points)
Replied 09 September 2014

dear ashish,

according to section 54 of income tax act capital gain arising from a long term capital asset shall be exempted if the capital gain is invested in purchase of another residential house before one year(relevant in your case) or after 2 years.

since you are purchasing the new house within one year before the sale, your capital gain can be exempted.

hope this helped