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Old House Sold

Raumita Das (student) (73 Points)

19 December 2007

We have sold an old house which we had acquired in year 1992.
Sale Value (sold in Dec2007)=12,00000
Purchase Price(1992) = 3,00000(incl. exp for registration)

Now, i have deposited the draft (of 12lacs) into my savings a/c and it will get credited soon.
We r also planning to buy a new flat after adding some more money - which should qualify for exemption u/s 54. But for the time period, i.e 2 years within which we r supposed to buy a new flat, what shall we do with the amount? Shall we keep it in the Savings Bank A/c itself?
To avoid paying Capital Gains @ 20%, is buying a new house within the specified time period compuslory? or thr are any other options to save Cap. Gains tax...?

Thanks.
-Amrita.

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5 Replies

CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. M.COM. ) (9017 Points)
Replied 19 December 2007

Hi Amrita Cost of inflation index in 1992-93 is 233 and in 2007-08 is 551 So,Accordingly you will be calculate your Capital gain According to Section 54: In case the asset transferred is a long term capital asset being a residential house, and if out of the capital gains, a new residential house is constructed within 3 years, or purchased 1 year before or 2 years after the date of transfer, then exemption on the LTCG is available on the amount of investment in the new asset to the extent of the capital gains. It may be noted that the amount of capital gains not appropriated towards purchase or construction may be deposited in the Capital Gains Account Scheme of a public sector bank before the due date of filing of Income Tax Return. This amount should subsequently be used for purchase or construction of a new house within 3 years. So,you have to deposit entire money in the Capital Gain Account Scheme for claiming the exemption before 31st march 2007. Hope its residential house, if its not residential house than Sec.54 F is applicable. According to Section 54F: When the asset transferred is a long term capital asset other than a residential house, and if, out of the consideration, investment in purchase or construction of a residential house is made within the specified time as in sec. 54, then exemption from the capital gains will be available as: (i) If cost of new asset is greater than the net consideration received, the entire capital gain is exempt. (ii) Otherwise, exemption = Capital Gains x Cost of new asset/ Net consideration. It may be noted that this exemption is not available, if on the date of transfer, the assessee owns any house other than the new asset. The Finance Act 2000 has provided that with effect from assessment year 2001-2002, the above exemption shall not be available if assessee owns more than one residential house, other than new asset, on the date of transfer. Investment in the Capital Gains Account Scheme may be made as in Sec.54. +Thanks & Regards Amit Daga

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Raumita Das (student) (73 Points)
Replied 19 December 2007

Yes, its a residential House Property. I need a clarification: To get benefit from Sec. 54, do i need to put the ENTIRE Sale consideration into the Capital Gains Deposit Scheme before 31st MArch 2008, OR Only the amount which will represent the Capital Gains on the sale of the house property? Thanks.

Raumita Das (student) (73 Points)
Replied 19 December 2007

If i purchase bonds u/s 54EC, will i need to pay tax on capital gains in i hold on to the bonds for more than 3 years?

CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. M.COM. ) (9017 Points)
Replied 20 December 2007

Amrita For benefit from Sec. 54, You need to put the only the amount which will represenjt the capital gain on the sale of the house property.But still i am not sure,but i think i am correct. Because in case of Sec 54 F you need to put the Entire sale consideration into Capital Gains Depost Scheme but i dont think that this provision is applicable for Sec 54.

CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. M.COM. ) (9017 Points)
Replied 20 December 2007

Section 54EC: This section has been introduced from assessment year 2001-2002 onwards. It provides that if any long term capital asset is transferred and out of the consideration,investment in specified assets(including bonds isssued by National Bank for Agricultural & Rural Development or by National Highway Authority of India or by Rural Electrification Corporation is made within 6 months from the date of transfer, then exemption would be available as computed in Sec. 54F. Sec.54F deals with other than residential house.So, i dont think that you will get exemption u/s 54EC.