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Long term capital gains- query

Rakesh (Proprietor) (70 Points)

12 December 2013

I sold my residence and have made gains of 7 lacs. Since I was holding this asset for more than 10 years long term capital gain is applicable. I intend to buy another house worth 20 lacs. I will pay 7 lacs before 31/7/2014 ( last date of return filing) and balance 13 lacs before 30/11/2015 ie within 2 years of selling 1st residence. Can I claim tax exemption of 7 lacs although I will be making part payment.? The entire transaction including registration of documents will be completed only by 30/11/2015 but within 2 years of selling 1st asset.

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7 Replies

Mihir (Wealth Manager) (5293 Points)
Replied 13 December 2013

How did you arrive at Rs. 7 lacs as gain? Is it long term capital gain or is it only a profit over cost earned?

If Rs. 7 lacs is the LTCG, then you are required to invest this amount in another property before 31/07/2014 or else deposit the sum in capital gain account, and then invest in another property when time comes before 2 years.

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Rakesh (Proprietor) (70 Points)
Replied 13 December 2013

Thanks Mihirbhai.7 lac is LTCG after adjusting cost for inflation using CFI. My new property is worth 20 L. I invest 7L before 31/7/2014 and rest 13L after 31/7/2014 and get property registered in 2015. My query is Can I make part payment before 31/7/2014 and claim benefit under Section 54 and close property transaction within 2 yrs of selling 1st property? Thanks

Swami Ayyappa Nuli (TAX ADVISOR & CONSULTANT AT G.S.T SUVIDHA CENTER) (1372 Points)
Replied 13 December 2013

To get capital gain exemption in your scenario,you need to invest entire long term capital gain in new residential property but not entire sale proceeds.In your case if your sale proceeds are 1500000 and long term capital gain after setting of inflated cost is rs700000,you need to invest 700000 by the 31/07/2014 to get exemption of capital gain,i think you thought entire amount invested in New residential property will be available for capital gain exemption.and furthur you are right to complete sale transaction with in 2 years of sale of first property

Mihir (Wealth Manager) (5293 Points)
Replied 13 December 2013

Yes, only the calculated LTCG (Rs. 7 lacs) is to be invested to avail exemption u/s 54, and the return is to be filed before due date (31/07/2014). It does not matter if you are investing some of your savings or profit from the previous sale in the new property.