CA Sanjay Baheti (PROPRIETOR) (1155 Points)
13 February 2010A PERSON SOLD A HOUSE (BUILT WITH LOAN AMOUNT)AND IT RESULTS IN CAPITAL GAIN. HE CLEARS THE BALANCE LOAN AND DEPOSITS IN CAPITAL GAIN AC OF SBI. BEFORE THE EXPIRY OF 3 YEARS, HE CONSTRUCTS THE NEW HOUSE AND UTILISES FULL CAPITAL GAIN.CAN HE GET FULL EXEMPTION FROM CAPITAL GAIN TAX? IN OTHER WORDS, CAN HE REPAY LOAN OUT OF CAPITAL GAIN TO GET BENEFIT US 54 ?
Regards
Ca Sanjay Baheti
CA Pranjal Joshi
(CA)
(331 Points)
Replied 13 February 2010
Hi,
Repayment of Loan will not be available for exemption u/s 54.
But, to the extent of Indexed cost of Acquisition & improvement as the case may be, one can make repayment of loan without attracting capital gain tax, as sec. 54 requires investment of "Capital Gain" for claiming the exemption & not the net sale proceeds.
C.Balaji
(Learner)
(1867 Points)
Replied 13 February 2010
Mr.Sanjay Baheti
Sec 54 - Transfer of Res. house and purchase or construction of a new res. house....
Repayment of housing loan i.e. principal can be claimed as ded u/s 80 c.....
but pre-costruction principal cannot be claimed as ded....
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