1) You have option to invest in Pune house. Whenever you are selling immovable property and wants to save capital gain tax . Before selling property you have to invest in the new property of selling old property date pre or post with in one year.
Saving capital gains tax after selling a house
Dear Sir / Madam, I had bought a house in Thane in 2002, and have sold it less than six months ago. I had purchased an under construction house in Navi Mumbai in 2012, for which possession was taken in 2017 and for which I had taken a bank loan, which is currently being returned through monthly EMIs. I have invested in an under-construction flat in Pune, after paying the booking amount in November, 2017. I have been told by a CA that after taking into account price indexation, I will have to invest in bonds to save CGT on sale of Thane house. Kindly advise if the money gained from sale of Thane house can be used to pay up remaining loan of Navi Mumbai house; or if it can be invested in a Capital Gains Saving account and used to pay future instalments of Pune house? If neither of these options is allowed, do I have to compulsorily invest in bonds to save CGT? Thank you.
Asked 7 years ago in Property Law
Religion: Sikh
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7 Answers
Investment on bonds will be a right way
Capital gain tax can be saved by investing the amount of capital gain arise after the indexation cost and sales receipts within 2 years from the assessment year in which property is sold the capital gain amount can also be set up for any property which is purchased one year back after sale but the existing property it cannot be used for payment of any year my outstanding on previous purchase before 1 years
If you are not able to invest the specified amount in the manner stated above before the date of tax filing or 1 year from the date of sale, whichever is earlier, deposit the specified amount in a public sector bank (or other banks as per the Capital Gains Account Scheme, 1988).
People having long-term capital gains (LTCG) can avail tax exemption under various sections of the Income Tax Act by making prescribed investments.
The assessee is given two years to purchase the house property or three years for construction of the house property
Section 54: Profit on sale of property used for residence
Capital gain arising on transfer of a residential house is exempt u/s 54 if such capital gain is reinvested. The house may be let out or self-occupied.
On purchase of one residential house in India within one year before or two years after the date on which transfer took place, or, construction of one residential house in India within a period of three years after the date on which transfer took place, LTCG tax exemption is available.
The amount of capital gain, which is not utilised by the assessee for the purchase or construction of the new house before the date of furnishing of the return of income, shall be deposited by him under the Capital Gains Account Scheme, before the due date of furnishing the return.
LTCG, arising on the transfer of any capital asset, is exempt u/s 54EC if the assessee has, within the period of six months after the date of such transfer, invested the capital gain in specified bonds. The bonds, redeemable after three years, are those issued by the National Highway Authority of India and Rural Electrification Corporation.
You've been rightly advised that you have to invest in bonds, in order to avoid paying CGT on sale of your house.
You can't use the other methods specified by you.
U/s 54 in purchase of one residential house in India within one year before or two years after the date on which transfer took place, or, construction of one residential house in India within a period of three years after the date on which transfer took place, LTCG tax exemption is available. So, you have an option of reinvesting the sale proceeds too.