Go Ad-Free on CAclubindia with Daily Mobile Updates. Subscribe Now!

Can long term capital gain be rotated before july 31st

K. meharnath (prop) (141 Points)

06 January 2011

Hi,

I have a long term capital gain of Rs.10lac. Total sale cost is 15 lac.

Under section 54F (Land only) -

Kindly clarify the following.

I will buy another LAND within one month of sale, sell the same for a profit (short term capital gain), and then reinvest Rs.15 lac in a NEW HOUSE within march 31st. Will I be eligible for exemption under Section 54F. Can I rotate the money lying in my Savings account within july 31st for some other profits, and then finally invest in the NEW HOUSE as per laws.

Reply
Follow
Share

5 Replies

rachit jain (chartered accountant ) (635 Points)
Replied 07 January 2011

to claim exemption u/s 54 f, you have to invest capital gain in residential house property only. you will not get exemption if you invest in land. you can invest in house property within 2 years from the date of sale in case of purchase of house property or 3 years in case of construction. till that time you can keep the capital gain amount with bank in capital gain a/c.

Upgrade to CAclubindia Pro. Subscribe Now!

K. meharnath (prop) (141 Points)
Replied 07 January 2011

Hi,

Any residential property holds good residential land + house on it. Now I have bought only land and the term "new house" used in the act, is treated to be finished once I complete a house on the said land. The cost of investment includes the cost of land + construction

Thanks for your effort to interpret and reply.

meharnath.

M.M.SURANA (Director -Taxation ) (532 Points)
Replied 09 January 2011

The amount should be deposited in Capital Gain A/c on or before due date of filling Return u/s 139(1), hence as per my opinion till it can be used.

1 Like

s (-) (216 Points)
Replied 18 January 2011

1) The Wordings are "Residential house Property" which means primarliy "Superstructure on Land" and not the Land itself. Any structure to be called "House Property" should be such, in which any human being can reside and it should atleast have 4 walls and a roof. Hence, only Land without any superstructure on it does not Qualify for Exemption.

2) The Act requires you to DEPOSIT the money on or Before 31 July, but it nowhere states that the sale proceeds should be directly invested. Hence, you can rotate the money. But you must ensure that you deposit the CG in an "SPECIAL ACCOUNT" specifically for exemption of unutilised CAPITAL GAINS with any Scheduled Bank.

However, you must utilise the same amount within 3 years form the date of transfer of the original Capital Asset.

1 Like

K. meharnath (prop) (141 Points)
Replied 18 January 2011

Hi,

the term house property does include the cost of land. Without the land, where will the sructure be built. Even the apartment will carry an undivided share of the land. There is no doubt, that under 54f land + building is eligible for exemption, and not just land. Hence if I purchase a land and construct a house thereon within july 31st then I am eligible for exemption. Let me know case laws if it is not so.

However thank you for the confirmation, that the amount could be rotated for any other purpose before july 31st.

Let me know about one more thing.

Is there any Percentage of house value vis a vis land value that is to be constructed on land so as to claim exemption. For example: If the land cost is 50lac and the house construciton cost is 1 lac, will it be eligible for exemption? Or is that the cost of houe should be a minimum of certain percantage cost of land, so as to claim exemption. Please answer this. Thanks.

meharnath.