Celebrate Freedom with 20% OFF on CAclubindia Pro Subscription. Use Code: FREEDOM20

Long Terrm Capital Gain Tax Expemption - Question

Tax queries 102 views 1 replies

PB

NA

41 Points Joined November 2021

Hello -

I plan to sell my residential property next year (abt 2 Cr). In order to get exemption on long term capital gains, I plan to purchase another residential property.
I plan to make the purchase this FY (March) and sell my current property next FY sometime Oct-Nov.

Can you please provide some guidance on my below queries?

I understand property can be purchased 1 year before or 2 years after the sale. Could you please confirm? Any specific ITR forms needed, as the purchase is prior to the sale?
As I will not receive my capital gains yet for the sale, can I purchase with my personal savings / pension amount (and not take any loan)? (I am Senior Citizen, 70 years)
Should the purchase be made with SALE AMOUNT or LTCG AMOUNT?

I am very thankful if someone can provide guidance here.

Thank you!

Replies (1)

Rama chary Rachakonda

Master in Accounts & high court Advocate

8979 Points Joined December 2011

You're planning to sell your residential property and purchase another one to claim exemption on long-term capital gains (LTCG). I'll address your queries to help you navigate this process. Key Considerations 1. *Time Frame for Purchase*: As per Section 54 of the Income Tax Act, 1961, you can purchase a residential property within one year before or two years after the date of sale of the original property. 2. *ITR Forms*: Since the purchase is prior to the sale, you won't need to file any specific ITR forms immediately. However, when you file your ITR for the year in which you sell the property, you'll need to report the sale and claim exemption under Section 54. 3. *Source of Funds for Purchase*: As a senior citizen, you can use your personal savings, pension amount, or any other legitimate source of funds to purchase the new property. You're not required to take a loan. 4. *Purchase Amount*: To claim exemption under Section 54, the purchase amount should be equal to or more than the net sale consideration (i.e., the sale amount minus any deductible expenses like brokerage, stamp duty, etc.). It's not necessary to use the entire sale amount for the purchase. Additional Tips 1. *Ensure the Purchase is Made in Your Name*: The new property should be purchased in your name to claim exemption under Section 54. 2. *Maintain Documentation*: Keep records of the sale and purchase transactions, including receipts, invoices, and bank statements, to support your exemption claim. 3. *Consult a Tax Professional*: It's always a good idea to consult a tax professional or chartered accountant to ensure you're meeting all the requirements and following the correct procedures. By following these guidelines, you'll be able to claim exemption on LTCG and make the most of your property transactions.

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register

Recent Threads

More recent discussions | Post

Related Threads