As per Section 54, If the new house is sold within 3 years from the date of purchase or construction, then the exemption claimed earlier under section 54 shall be indirectly taxable in the year of sale of the new house property. That is, the purchase value of the property will be considered to be NIL (if the capital gains of previously sold HP < Investment in such HP)
If the newly purchased house property is sold after 3 years, will the cost of HP be considered the amount paid for purchasing such property? Or will it still be considered NIL?
In the first case cost can't be NIL.Only LTCG deduction availed can be deducted from cost.
In the second case cost can be considered since it is after the period allowed.
If the new house is sold before a period of 3 years from the date of its purchase/completion of construction, then at the time of computation of capital gain arising on transfer of the new house, the amount of capital gain claimed as exempt under section 54 will be deducted from the cost of acquisition of the new house
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