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Capital gains tax

bruno (engineer) (53 Points)

16 March 2012

i purchased a house on loan last year in april 11...this year i am selling a flat which i inherited.i wanted to know if can sell this flat and use the money to repay back the loan for the house without having to pay any capital gains tax?is there any loop hole? does section 54 apply here or does the new house have to be purchased only after selling the flat?

am confused

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8 Replies

Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 16 March 2012

As per section 54 of the Act, if the new house is purchased one year before the sale of the old took place, then the purchase of the new house would be eligible for exemption. So this year you will have to sell the flat in apr12, so that you will be eligible to claim the exemption u/s 54.

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V.MASTHANVALI (ACCOUNTS EXECUTIVE) (89 Points)
Replied 16 March 2012

yes. Agreeed with Giridhar Sir,

the exemption limit will be the Investment in the new asset or capital gain whichever is lower.

and the new asset should not be transferred before 3 years after claiming exemption.

bruno (engineer) (53 Points)
Replied 16 March 2012

thanks Mr Giridhar...so just to be clear...the flat has to sold after the house i bought completes more than a year?or the sale should be done before the new house completes a year?pls let me know ..

and also how do u claim the exemption?do u have to file returns for dat?

thanks

Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 20 March 2012

Hi Bruno. the sale should be within one year from the date the trasnfer took place.

Yes to claim the exemption, you will be required to file your I-T return on or befoer the due date of furnishing your I-T Return. In that the detailed of calculation of the Capital Gains should be given as below:

Sale Consideration xxxxxx

Less: Brokerage Paid xxxx

Indexed Cost of Acquisition xxxxxx xxxxxx

Long Term Capital Gains xxxxxx

Less; Exemption u/s 54 xxxxxx

LTCG chargeable to tax xxxxx

If the Cost of Acquisition of the new house is less then the Capital Gains then on the balacne you wud be requried to pay LTCG tax @ 20%.

Your Indexed COA would be the Cost of the Acquisition of the house purchased multiplied by Cost Inflation Index for the year when the sale took place divided by Cost Inflation Index of the Year when the property was being purchased.

bruno (engineer) (53 Points)
Replied 20 March 2012

hi thanks mr giridhar.see i bought the new house in april 2011..but have not yet sold my flat,so the new house has already completed one year,does that mean that i cannot make use of section 54? and also instead of the LTCG tax of 20% cant i put the money remaining frm the sale in bonds as i understand that here the cash will be locked for 3yrs and only the interest will be taxed...thnks again for takin the trouble to reply.

regards

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Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 20 March 2012

Yes, if you the house is not sold within one eyar, then you cant take the benefit of section 54. however you cna invest the capital gains in the bonds issued by REC & NHAI maximum upto Rs. 50lacs within 6months from the date of trasnfer & on the balance you will ahve to pay CG tax @ 20%.

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bruno (engineer) (53 Points)
Replied 25 March 2012

what if i get an amount for the flat sold which is same as the value of the new house ie the capital gain is nothing,do i still have to pay a tax or can i directly go ahead and pay back my loan for the new house?