Sunday, September 18, 2011

Sell a house — Buy a house save capital gain

By on 7:35 PM

If you wish to buy a property from the sale proceeds of the existing property, then the long-term capital gains incurred will be exempt under Section 54 to the extent of the long term capital gains incurred or the investment into the new property, whichever is lower. 

However, the condition is that the new property should be purchased within a period of two years from the sale of the existing property (three years in case of an under construction property) or within one year prior to the sale of the existing property. 

This means that it is not necessary that the new house be purchased from the sale proceeds of the existing property, given the new property was purchased a year before the sale.

However, if you have not invested your long-term capital gains on the existing property into a new property till the due date of filing tax returns (31st July), you are required to invest the entire long-term capital gains into a Capital Gain Account Scheme (CGAS) with any nationalised bank in order to avail an exemption in the current year. 

In the future, you can withdraw this amount from the CGAS and utilise it for investing into a new property within the specified duration as discussed above. If the entire LTCG from the CGAS is not utilised for the investment into a new property, then the difference amount will be added back to your income and taxed at Slab rates. 

The benefit of sections 54 and 54F is available to only individuals and HUF, whereas the benefit of section 54EC is available to all the assesses.

About Syed Faizan Ali

Faizan is a 17 year old young guy who is blessed with the art of Blogging,He love to Blog day in and day out,He is a Website Designer and a Certified Graphics Designer.


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