- Under the Income Tax Act , property is regarded as a capital asset and any gains arising from its sale is taxable as Capital Gains.

- Further, if the property is held for less than three years prior to its sale, it is termed as a short-term capital asset and any gain arising from the sale is treated as a short-term capital gain.

- Further, if the property is sold after a holding period of more than three years, it is to be treated as a long-term capital asset and a gain arising from its sale is assessed as long-term capital gains

- As per Section 54 & 54 F  of the Income Tax Act, you can re-invest the long term capital gains amount in residential house property and claim an exemption therein.

- Further , no tax shall be paid , if you use the entire gain to buy another house within 2 years from the selling of your old property .

Any gain on sale of a plot of land can be claimed as exempt under Section 54F, if net consideration is invested in purchase of one residential house property. The new house property has to be purchased within one year before or two years after the date of transfer of capital asset or constructed within a period of three years after the date of transfer.

You don’t have to pay capital gains tax if new house is constructed within 3 years of sale of land 

Exemption under section 54 can be claimed in respect of capital gains arising on transfer of capital asset, being long-term residential house property.

To claim exemption under section 54, another house should be purchased within a period of one year before or two years after the date of transfer of house.

The asset transferred should be a long-term capital asset, being a residential house
property.

Land is a Capital Asset and and as an appreciated asset, a landowner can make huge capital gains on its sale.

If you are using your entire sale proceeds to buy a house property you may end up paying no tax on your gains when – You satisfy all these conditions 

• Purchase one house within 1 year before the date of transfer or 2 years after that
• Construct one house within 3 years after the date of transfer
• You do not sell this house within 3 years of purchase or construction
• This new house purchased or constructed must be situated in India

Yes ita acceptable. You need to pay capital gains tax if applicable

- Naturally, if you will not use the capital from the selling plot for buying , then you will have to pay the capital gain tax. 

- Read my earlier reply promptly 

Dear Client,

Yes, it is possible under the section 54 of the Income Tax Act. Following conditions should be satisfied to claim the benefit of section 54.

1. The benefit of section 54 is available only to an individual or HUF.
2. The asset transferred should be a long-term capital asset, being a residential house property.
3. Within a period of one year before or two years after the date of transfer of old house, the taxpayer should acquire another residential house or should construct a residential house within a period of three years from the date of transfer of the old house. In case of compulsory acquisition, the period of acquisition or construction will be determined from the date of receipt of compensation (whether original or
   additional).

Thank you.