Save capital gain tax - property purchase and sale

Paying the loan will get you exemption from CG Tax as it is not a specified mode of investment, unless, the flat was purchased within a year before the sale of the house.  Legally, he is only a part owner of the flat and that counts for CG purposes. 

Originally posted by : Alok
	Dear experts, My father (retired) purchased a flat at my native place jointly with me in March 12. We took loan from HDFC (30 L) with me as applicant and my wife & father as coapplicant. Wife's name is as coapplicant but she is not the co owner. My father wants to sell our house (which is exclusively in his name) and repay the loan. The house was built by him over a long period after purchasing land in 1976. We have land papers but no documents to prove the building cost. My queries are: (i) whether father can pay entire loan if he gets the price for old house. (ii) whether he can get advantage of LTCG on this amount. (iii) As new flat is in joint name whether he is allowed only 50% of loan amount repayment? My aim is to save LTCG tax. Please suggest the methods.   Thanx in advance.

Yes. The amount of LTCG can be utilized to repay housing loan of new house purchase one year before or within two years from the date of transfer of house property. 

As house in built in 1976, I strongly suggest you to get valuation done for the land as well as construction for 1st April 1981 as the cost of acquisition in case of capital assets purchased or constructed before 1st april 1981 to be taken as higher of the actual cost of acquisition or the valuation as on 1st april 1981. Thus in your case you need the valuation report for 1st April 1981 which will be your cost of acquisition which is to be indexed further as reduced from sale consideration to arrive at LTCG.

Do get valuation done from an Govt.Approved valuer.

I hope it resolves your query.