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Tax planning in caseof sale of residential property and reinvestment in commercial premises

mona (Direct Tax) (136 Points)

08 November 2018

We have sold an residential property in order to invest in commercial premises.I case a residential property is sold theexemption from capital gains can be availed only either by reinvesting in residential property, or reinvestment in specified bonds.

But i will need funds to invest in commercial premises..............what can be the way in which tax planing can be doe so as to reduce my capital gains burden

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11 Replies

Nitesh bind (Student CA Final ) (12692 Points)
Replied 08 November 2018

In my opinion there is Only ONE way which is given u/s 54GB and that too is pretty much complex. And for that you need to share more details like what kind of business are you going to open, Is it related to manufacturing or It involved use of t technology etc.

Apart from this I think there is hardly any possibility.

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rama krishnan (12239 Points)
Replied 09 November 2018

by investing in specified assets you can surely claim deduction under 54GB but still it won't help your case.
only way out is to invest in specified bonds for time being and the same can be withdrawn after 3 years for investment in commercial property

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Nitesh bind (Student CA Final ) (12692 Points)
Replied 09 November 2018

Sure Mr Rama Krishnan, 54EC is going to help but as Ms Mona said she wants to buy the property now and therefore 54EC won't be possible because there is Lock in of 3 years in that.

Further, Through 54GB there is possibility that one Eligible company can be formed by Herself and then through that company purchase the commercial property and then you'll be able to get the benefit of exemption as well.

If you want instant Deduction then I think there is only through 54GB and if you can wait for 3 years then you could purchase the specified bonds and get the Deduction as well.

Thanks.

rama krishnan (12239 Points)
Replied 09 November 2018

agree with you Mr. nitesh, but starting a company with in the stipulated time is a hectic job and literally not feasible

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mona (Direct Tax) (136 Points)
Replied 09 November 2018

No 54 GB shall not work in my case since in that section also initially i have to utilise the funds for subucribing to the equity shares of the eligible company who in turn will will utilise the funds for purchase of an asset for which there is an lock in of 5 years

so 54 GB ruled out..

in case of 54 EC again there is an lock i period of 3 years ....................

we need to figure out something that can help...........i need to invest in commercial property asap .....and reduce my tax burden also

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mona (Direct Tax) (136 Points)
Replied 09 November 2018

yap true but very difficult procedure..............

Nitesh bind (Student CA Final ) (12692 Points)
Replied 09 November 2018

That's what I'm telling you to form a company and invest the sale consideration to its shares and then purchase the commercial property through company itself.