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Proceeds from sale of house utlised for payment of other housing loan - Tax Impact?

Akshay Mittal (student) (65 Points)

11 December 2019

Hi,

I have two house properties (for simplicity sake I am naming it "A" and "B"). I want to sell house A and use that sale proceed to repay the housing loan for house B.
For eg. Sale proceeds of house A is 70L (with indexed cost of purchase being 50L, the resultant LTCG 20L) and the same would be used to repay the pending housing loan for house B of 25L. In this case would I attract any Tax liability on sale of house A?
Could anyone please guide me here?
Many thanks in advance.

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10 Replies

Prince Parashar (52 Points)
Replied 12 December 2019

Deduction allow u/s 24(b) only interest on loan not whole loan, maximum 30000RS if loan was taken after1/4/1999 onward then it would be maximum RS 2lakh,hence your question is based on

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Akshay Mittal (student) (65 Points)
Replied 12 December 2019

My query is regarding the Capital gain impact... i.e. Will the capital gain on sale of property will be allowed to be offset against housing loan repayment?
Thanks.

Prince Parashar (52 Points)
Replied 12 December 2019

Yes, under section 54 of income tax act1961

Akshay Mittal (student) (65 Points)
Replied 12 December 2019

Thanks Prince. So to give an example, if the long term capital gain is 20L which is used to repay housing loan of 25L, in this case the entire capital gain would be offset and no tax liability on capital gain portion, right?

Prince Parashar (52 Points)
Replied 12 December 2019

Sorry for writing 1961 instead of 1962

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rama krishnan (12239 Points)
Replied 12 December 2019

For the scenario elaborated here no 54 deductions can be claimed. 54 deductions can be claimed only if the capital gains from the sold property is utilized to purchase or construct new house property and not to repayment made to offset the housing loan already existing house property unless the house property under loan was purchased within one year before the date sale of property A

Prince Parashar (52 Points)
Replied 13 December 2019

Read section 54 with section 54f

Akshay Mittal (student) (65 Points)
Replied 16 December 2019

Could someone please confirm whether it's eligible for exemption or not? The housing loan which will be paid using the sale proceeds is two years old.

Ritwick Bhanusali (student) (122 Points)
Replied 17 December 2019

No. Not eligible for any exemption on repayment of loan for the house purchased before one year.

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Akshay Mittal (student) (65 Points)
Replied 25 December 2019

Ok.. So in this case if I want to claim exemption on the sale proceeds of house A (as I can't claim exemption by paying a two year old housing loan of house B), what other options I have to not attract tax on Sale proceeds of house A?
Could few people opine. Thanks in advance.