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Tax planning in caseof sale of residential property and reinvestment in commercial premises


Direct Tax

We have sold an residential property in order to  invest in commercial premises.I case a residential property is sold theexemption from capital gains can be availed only either by reinvesting in residential property, or reinvestment in specified bonds. 

But i will need funds to invest in commercial premises..............what can be the way in which tax planing can be doe so as to reduce my capital gains burden

??

 

 
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Student CA Final

In my opinion there is Only ONE way which is given u/s 54GB and that too is pretty much complex. And for that you need to share more details like what kind of business are you going to open, Is it related to manufacturing or It involved use of t technology etc.

Apart from this I think there is hardly any possibility.

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by investing in specified assets you can surely claim deduction under 54GB but still it won't help your case.
only way out is to invest in specified bonds for time being and the same can be withdrawn after 3 years for investment in commercial property

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Student CA Final

Sure Mr Rama Krishnan, 54EC is going to help but as Ms Mona said she wants to buy the property now and therefore 54EC won't be possible because there is Lock in of 3 years in that.

Further, Through 54GB there is possibility that one Eligible company can be formed by Herself and then through that company purchase the commercial property and then you'll be able to get the benefit of exemption as well.

If you want instant Deduction then I think there is only through 54GB and if you can wait for 3 years then you could purchase the specified bonds and get the Deduction as well.

Thanks.
 
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agree with you Mr. nitesh, but starting a company with in the stipulated time is a hectic job and literally not feasible

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Direct Tax

No 54 GB shall not work in my case since in that section also initially i have to utilise the funds for subucribing to the equity shares of the eligible company who in turn will will utilise the funds for purchase of an asset for which there is an lock in of 5 years

so 54 GB ruled out..

in case of 54 EC again there is an lock i period of 3 years ....................

 

we need to figure out something that can help...........i need to invest in commercial property asap .....and reduce my tax burden also

 

 

 
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Direct Tax

yap true but very difficult procedure..............

 
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Student CA Final

That's what I'm telling you to form a company and invest the sale consideration to its shares and then purchase the commercial property through company itself.
 
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in that case to my best of knowledge, there's no way out

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Student CA Final

@ Mona if you have say 50 Lakhs Capital gains then for sure it's not a difficult procedure .
 
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