• Capital Gains on sale of 2 properties to buy a single one

I had sold a residential property in Mumbai for 10cr. I bought a new apartment for 13.5cr. 
I took a 20 year tenure housing loan from the bank for the extra 3.5 cr. 
Now I have an worth 1cr in my native place Kerala which I bought 5 years ago. 
If I sell this property, and pay off part of the bank loan, will I be able to save on the capital gains tax of 20%?
Asked 10 months ago in Property Law from Mumbai, Maharashtra
Religion: Christian
Yes, since you are investing the sale price of a real estate in another property whose price is less than what it is required to buy the new one,you are not required to pay capital gain tax.
Devajyoti Barman
Advocate, Kolkata
6409 Answers
71 Consultations
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1) on sale of the property you can pay off part of the bank loan and save on capital gains tax

2) there is no bar on acquiring one residential house out of sale proceeds of two or more properties 

3) Section 54 allowed exemption with respect to residential properties, the income from which was chargeable under the head ‘income from house property’.

4)there was no restriction in Section 54 that did not allow the exemption in case of sale of one house. Even if the assessee sells more than one residential property in the same year and the capital gains are invested in a new property, claim for exemption cannot be denied if other conditions under the section were fulfiled
Ajay Sethi
Advocate, Mumbai
25944 Answers
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The issue is whether the exemption u/s 54 was available in cases where more than a single house is sold and the resultant combined long-term capital gain is invested in purchasing or constructing one single residential property within the prescribed time limit of 2 years or 3 years as the case may be.
Sec. 54 states, “… where… the capital gains arises from the transfer to a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head ‘Income from house property’ …
Clearly, the Section itself has defined the expression ‘a residential property’ to mean buildings or lands appurtenant thereto. This expression is descriptive of the nature of the property and not the quantity.
Consequently, there is no bar on acquiring one residential house out of sale proceeds of two or more buildings or lands appurtenant thereto.
It has to be carefully noted that such a property need not necessarily be a residential house. The only restriction is that the income therefrom should be chargeable under the head ‘Income from house property’.
T Kalaiselvan
Advocate, Vellore
16311 Answers
152 Consultations
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The sale of my second Kerala apartment is 2-3 months after I have bought the new 13.5cr one.
How do I show it as payment for that? Can I just use the new 1cr to clear the loan and prevent capital gain tax?
My CA says that for the second Kerala flat that I am selling,  I have to prove that I used it for personal use.
Is that necessary???

Since it is coming under the time span limit, you are eligible for the concessions under section 54 of the act.
It is clear that if an assessee now sells one or two or any number of residential houses in any financial year, he can claim exemption by buying one residential house in India.  What is your CA meant to say by telling that you have prove that you have used it for personal use. It goes without saying that it is for personal use only, i.e., even the business is for personal only and not a charity.
T Kalaiselvan
Advocate, Vellore
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152 Consultations
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you can pay loan amount out of the sale amount of the second land. you will save capital gain tax because sale amount is used in payment of another immovable property. when income arised from immovable property is again invested into immovable property then it is treated by the tax law that assesse's is not gain any capital amount because cash transferred from one property to another property.
Shivendra Pratap Singh
Advocate, Lucknow
2960 Answers
45 Consultations
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