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Usage of funds in ltcg account

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Prithesh

AVP

33 Points Posted on 26 March 2012

Hi,

I sold a residential plot in December 2011 and parked the funds in a LTCG account.

Can i use the funds for buying a residential property only or can this be used to buy a commercial property like an office premises?

Kindly clarify.

Regards,

Prithesh

Replies (1)

Deepthi Srivastava

Chartered Accountant

52 Points Posted on 26 March 2012

The amount of capital gain deposited in the LTCG a/c shall be used to purchase a residential property within 1 year before (or)2 years after the date of transfer (or) construct a residential property within 3 years from the date of transfer.

In case you plan to use the amount deposited to purchase commercial property, please be prepared to pay Capital gain tax that you saved when you had sold the residential plot in Dec 2011.

Even if you plan to purchase/ construct a residential property, it is important that you invest the whole of the capital gain amount in purchase/ construction. If the amount of capital gain is more than the cost of the new asset, then the difference will be charged as your income for the previous year u/s 45.

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