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Income from house sell

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Nyk

22 Points Posted on 04 July 2022

Hello

I am selling my house which will lead to a capital gain.
I live in a standalone house. I plan to use the capital gains from the house sell to build another floor on top of my current house.
Can I do this without paying taxes on the capital gain?
Is this considered same as reinvesting the amount in another property within 2 yrs timeframe to save on the capital gain tax?

Thanks.

Replies (4)

Quick Summary

This discussion explores whether capital gains from selling a standalone house can be tax-exempt if reinvested into building an additional floor on the current property. The consensus is that this is permissible under Section 54 of the Income Tax Act, provided the new floor is treated as a separate dwelling. This is considered a valid reinvestment similar to purchasing a new property within the stipulated timeframe to avoid capital gains tax.

Rama chary Rachakonda

Master in Accounts & high court Advocate

7021 Points Posted on 04 July 2022

The long-term capital gain on the sale of property is exempted if the proceeds are invested in the purchase or construction of a house. The purchase of property can happen a year before the sale of the property in question or two years after its sale. Alternatively, one can invest in infrastructure bonds notified by the government. But one has to be mindful of the fact that these investments have a lock-in period.