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Capital gain

e.mohan goud (Paid Asistant) (141 Points)

29 December 2016

hai, one of my friend sold Building for Rs.25,00,000 in the month of Nov-2016. He Purchased land on Feb-2009 and construct building in 2011. Cost of the land is Rs.2,00,000 and construction cost is Rs 13,00,000( there is no Evidence for construction cost, it is approximate amount). He wants to buy new house next year. can you please guide me how to claim 54 exemption and is it needfull to provide vouchers or evidence for amount of construction to the department

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5 Replies

Easetaxsolutions (Properitor) (41 Points)
Replied 29 December 2016

whether the building is residential or commercila please specify

e.mohan goud (Paid Asistant) (141 Points)
Replied 29 December 2016

Building is residential

A.Gopal (Partner) (63 Points)
Replied 30 December 2016

Capital Gain on sale of a residential building:

In the case of claim for exemption from capital gains on sale of a residential house retained for more than 36 months, the relief from tax can be availed by opting either of the following to invest within 6 months of Sale ("Transfer") the gain quantum in 54EC bonds or alternativel to invest the gain in the purchase of another residential property within 2 years or construction of a residential property within 3 years from the date of sale.

If your friend opts for availing the second alternative, then he has an obligation to invest the gain quantum on or before 31.07.17 in a capital gains deposit scheme.

In case the utilisation in purchase gets completed before the 31.07.17, the gain is considered as utilised.

Any amount deposited into Capital gain deposit account has to be utilised only for that purpose.

If the new house is either not purchased wihin 2 years or the construction does not get completed within 3 years the capital gains proposed to be claimed as exempt in 31.03.17 by deposit, will be brought to tax as capital gain of 31.03.2020.

The construction having been completed before 2011, the asset will be a long term capital asset on its sale in Nov 2016.

If construction cost of Rs. 13 lakhs cannot be proved by way of supporting bank withdrawals or source then in case the officer asks for it during assessment, he may disallow / suggest for making additons in 2011 as investment out of undisclosed income.

To avoid this, the sale proceed of rs. 25 lakhs can be invested in bonds or deposited in Capital gains deposit scheme.