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How to save capital gain on sale of a plot

Shamita (Learner) (410 Points)

12 February 2012

A person want to sell a plot and purchase a residential house. The value of registry of the plot will be Rs. 7 lacs and value of registry of the residential property to be purchased will be Rs. 10 lacs. The plot was purchased in 1984 for Rs. 60,000.00. The sale of plot will be done by March 2012 and the residential property will be purchased in May/June 2012.

So how much Long term capital gain will arise and how to plan its saving.

Please reply.

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12 Replies

sanchit (none) (39 Points)
Replied 12 February 2012

your cost of acquisition is 60000 in 1984....so applying the cost inflation index of 2012 ( which is 785) and that of 1984 ( which is 125 ) your indexed cost of acquasition comes out to be 376800 ( 60000*785/125 )

so your long term capital gain is 700000-376800 = 323200

now if you want to save your tax you can get exemtion under section 54 for which you have to purchase a residential house property of atleast 7 lacs ( which you seem to be actually doing ) subject to the following conditions;-

1. you should not be the owner of more than 1 house property at the time of purchase of your new house property of atleast 7 lacs

2. secondly, the new house property taht you purchase should not be sold by you for atleast a period of 3 years from the date of purchase

3. you cannot purchase any other residential house property ( other than the one you purchase for saving tax ) for a peiord of 2 years from the date of sale of plot

1 Like

K.M.CHANDRAN (CHANDRAN&CO) (113 Points)
Replied 27 February 2012

I want to make a correction to the coments of Sri.Sanchit. For obtaining full exemtion in above case,new house property value should exceed the capital gain ie: Rs 323200 -not necessary to be Rs 7 lacs as mentioned by him. In case the amount of capital gain is more than the cost of new house property,the difference of the amount of capital gain and the cost of new house is chargeable to tax as capital gain.

K.M.CHANDRAN

K.M.CHANDRAN (CHANDRAN&CO) (113 Points)
Replied 27 February 2012

SEC 54 IS APPLICABLE ONLY FOR SALE OF RESIDENTIAL HOUSE PROPERTY NOT FOR A PLOT.

K.M.CHANDRAN

sanchit (none) (39 Points)
Replied 29 February 2012

sorry sir in my answer i had written section 54 but my reply is regarding 54F

section 54F is applicable on sale of any long term capital asset by an individual other than residential house property and in this section we have to invest the entire sale proceeds

so i am sorry that i quoted the wrong section by mistake but the answer was as per provisions of section 54F only which is applicable here on sale of plot of land

thanks

rohit (ttttt) (29 Points)
Replied 29 February 2012

plz anyone deal with this problem also

Can we claim deduction u/s 54 for the 1^st year and u/s 54F for 2^nd year for for the Purchase of the same property.

Case – Mr. X had two Property 1^st a Residential Property (used for own residence) and another a commercial building (rented to a National bank)

1^st plot was sold in yr 2009-10 and 2^nd plot was sold in yr 2010-11 and in actual he build up just 1 Residential house of a heavy Investment

Hence in order to save Tax on capital gain can we claim exemption u/s 54 for the 1^st house in yr 09-10 and u/s 54F for the commercial plot in yr 10-11 for the one house Built.

Plz refer the case of” Anagha Ajit Patnekar v ITO (2006) 9 SOT 685 (Mum)” or Page no. 306 from the book “Taxation of Capital Gain” by Mr. Girish Ahuja and Mr. Ravi Gupta

“Although case refer to use Single Section either 54 or 54F “There is no bar in section for claiming deduction 2ndtime or 3^rd time for the same property if the cost of the property is within the capital gain arisen to the assessee”.

Hence after reading the above judgment I want to ask can we claim exemption under two different sections for two different years for the purchase of single residential property as we were required to sell both properties so that we can a better house.

sanchit (none) (39 Points)
Replied 05 March 2012

Mr. Rohit

Actually to be honest m not very sure about the answer. I had Read in Mr. VK Singhania's book that we can claim deduction under section 54 after selling two or more residential properties by purchasing only a single residential property. But you have asked abt two different sections. Going by the Prudence, i think deduction will be allowable under both the sections if other requirements of 54 and 54f are satisifed. but Sorry to say i dont have any case law or book page number to substantiate this point. So I am not sure abt this

thakkar (D) (51 Points)
Replied 10 September 2012

Dear Sanchit or anybody else,

I stay in a house owned by my father (first name) and me (second name). My father is expired. Can I purchase another residential property to save capital gain tax which I am liable to pay on selling my flat ?

Thanks

Thakkar

ANANDA P (BRANCH MANAGER) (21 Points)
Replied 16 May 2015

I want to sell a plot that was purchsed for Rs.360000/- in Feb, 2006 and the value of registry of plot will be Rs.2050000/-. The value of registry of the new plot to be purchased will be Rs.1500000 by march,2016 from the sale proceeds of old site. What will the capital gain.

suresh lahoti (6 Points)
Replied 29 July 2017

27/7/2006 plot purchase kiya 234480 jisko mene 06/06/2016 me sale kar diya jiska amount hai 1280000/- to muje kitana tax paid karna hoga

suresh lahoti (6 Points)
Replied 29 July 2017

27/7/2006 plot purchase kiya 234480 jisko mene 06/06/2016 me sale kar diya jiska amount hai 1280000/- to muje kitana tax paid karna hoga

suresh lahoti (6 Points)
Replied 29 July 2017

27/7/2006 plot purchase kiya 234480 jisko mene 06/06/2016 me sale kar diya jiska amount hai 1280000/- to muje kitana tax paid karna hoga

Shekar S (2 Points)
Replied 28 July 2018

sir,

I have sold a 15 year old residential Plot for Rs 25 lakh,in that money i want to buy again plot only which is nearby can i get capital gain tax benefit for plot purchase or i have to construct house than only i can avail capital gain tax

(I may not able to construct house immediately