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Long term capital gain exemption

10 July 2018

HI Experts,

I sold a residential house and wanted to purchase a plot on which i will contruct house. I am planning to start construction next financial year. I need to know can i claim LTCG exemption during this financial year return. If yes, how to do that. I read that exemption can also be claimed if house is constructed within next 3 years. What documents and proof i need to maintain. Please let me know process in detail.

Note: I also hold another residential property in another city.

Regards

Sarabjeet Singh

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5 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (195640 Points)
Replied 10 July 2018

If the amount of net consideration is not re-invested to purchase or construct a residential house upto the last date of filing of return of income u/s 139, then the same amount should be deposited in the capital gain deposit account scheme with a specified bank upto the last date of filing of return.

The amount deposited under this Scheme must be utilized to purchase a construct a residential house within the specified period. If amount deposited is not utilized wholly or partly for the purchase or construction of a residential house within stipulated period, then the amount which remains unutilized shall be treated as capital gain of the previous year in which the period of 3 years from the date of the transfer of the original asset expires.

capital-gain-account-scheme/article

capital-gains-account-scheme

Sarabjeet Singh (5 Points)
Replied 24 July 2018

Thanks you sir for the advice. Couple of more queries.

1-I am planning to get the sale deed registration at name of my mother. Is it possible that i can open long term capital gain account at my name since i was the seller of previous property and gained profit and after some time i will invest that capital gain on the plot i am purchasing now at name of my mother for construction purpose.

2-I will be taking home loan for construction at the plot which is at my mother's name. Can i claim income tax benefits or not? Loan applicant and EMI will be processed at my name.

3. Do i need to keep proofs of contruction expenses like labour charges and raw material to claim the exemption later?

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (195640 Points)
Replied 24 July 2018

Unless you are owner or co-owner of the new house, you will not be eligible for any deductions.

Secondly, how can you claim exemption of the LTCG from the sell of house property, unless you have plot's document to claim the same.(assuming house to be constructed over it in specified time)

So, advisable to be at least be co-owner in the new plot.

Sarabjeet Singh (5 Points)
Replied 26 July 2018

Thank you sir for the advice. I will add my mother as the co-owner.

I am planning to sell another residential property in this financial year only. Can i club long-term capital gain of both the residential properties and buy another residential property other than this plot? I will not claim any exemption on this plot and will claim on a second one that i am planning to buy. Hope that should be fine.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (195640 Points)
Replied 26 July 2018

Yes, better option..... to be purchased within specified time limit u/s. 54..... & till that time amount can be deposited in CGSS acc. of any nationalized bank.