capital gains on sell of flat

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Hitesh malviya (Querist)
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17 March 2008 Dear Sir,
I intend to sell my flat in New Delhi after 5 years of ownership. During this process, I shall be making profit from my investment which will come as long term capital gain. Would I get any exception on tax liability on capital gains, If I invest my profit earned from selling this property for the purchase of a land for residential purpose?
I seek clarification on this matter pl.
Regards,

Hitesh Malviya

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Guest (Expert)

17 March 2008 To get the exemption from capital gain arising from sell of residential flat land is not qualified for exemption. If you construct a residential house on the land acquired by you within three years of sell of flat then you are eligible for exemption.

Further for getting the exemption the entire amount of capital gain has to be deposited in the Deposit account in accordance with Capital Gains Accounts Scheme, 1988

Mandeep Singh

Mandeep Singh (Expert)
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17 March 2008 Dear, You can buy residenital land but you have to construct residenital building on it within 3 years and if you are not able to purchase such property then please deposit your money in Capital Gain Deposit account before filing of ITR.

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K V Subba Rao

K V Subba Rao (Expert)
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17 March 2008 Buy residential land as per your choice. If you have resources and there are already Apartments or houses nearby, go for construction right now.

If you feel like postponing construction for few years or intend to hold the Property primarily in the form of residential plot only for appreciation in due course, construct just one or two small rooms with Load Bearing Walls and cement flooring or mossaic tiles etc., after obaining Municipal or Panchayat approval for Plan etc.

Get a Door No and let it out to some one more for security than for rent income. If some one doesn't right now come forward to occupy, lock the house for week end visits by your family.

For IT purpose, treat it is as self-occupied (if you do not already have more than one house in your name)or let it out for whatever rent it fetches.

Income Tax that you would be paying every year by treating the house as let out is nothing when compared to appreciation in land value.

Important: Ensure that cost of Plot as well as house construction do cover entire Capital Gains amount