capital gains - sec 54

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r.kulasekar (Querist)
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26 April 2009 A house property is sold in 2007. I already bought a house property in 2006, making part payment through a bank loan and setteled the remaining in 2007 out of the sale proceeds. An amount equalent to the loan amount (remaining sale proceed) has been used for own purpose. Can the loan amount be used for capital gain calculation? Is exemption possible?

CA. B.SRINIVASULU

CA. B.SRINIVASULU (Expert)
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26 April 2009 No exemption is not possible on the amount used for personal purpose. On the same you should pay the applicable caital gain tax.

r.kulasekar

r.kulasekar (Querist)
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26 April 2009 but the actual invst. is equivalent to the sale proceed. As the first instalment was paid before the sale was executed, a loan was taken. after the sale the loan was not closed.

Sale amt Rs.75 lakhs in 2007

purchase of flat:
first instalement Rs.17.50 lakhs (loan taken in 2006)
second and final instalment Rs.58 lakhs.(2007)

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Manoj

Manoj (Expert)
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11 May 2009 The second and final installment is eligible for exemption. If the loan amount is settled or if an equal amount is deposited in the capital gain scheme from the sale proceeds, It will qualify for exemption. In your case the amount equal to the bank loan is used for personal purpose. So it does not qualify for exemption. Capital gain tax at the rate of 20% is applicable on Rs. 17 Lakhs. The new house should be purchased within one year before the date of transfer of the old house.