Can you buy land and then construct to save LTCG tax

Respected Sir, My father has sold a resedential plot for 50L which he had purchased for 10L after 15 yrs.He had booked another plot from a builder a year ago . Instalments are being paid for the plot and possession is expected in a year and then we plan to construct it . The amount we have received from sale shall be adjusted in already paid and paying remaining instalment and balance shall be used for construction of house. My father has one resedential house in his name and has invested in an flat of builder and his paying instalment but the flat shall be in his name after three years or we have the option to sell it before getting it registered in our name. My question is are we eligible to save tax by investing in plot and the constructing it. & secondly does before possession & registration investing & paying instalment for an appartment amounts to owning a property. Regards Karan

asked Oct 21 '11 at 14:37 by silverrobin 1111


To save income tax from capital gains arising from sale of a plot, a new residential house property can be purchased or constructed. So if your father construct a house on land, he may take tax benefit for same u/s 54F.

But, u/s 54f following conditions have to be fulfilled:

  1. Construction for new house should be completed within three years of sale.
  2. Your father should not be owning more than one residential house(flat/house/apartment) apart from one being built, at the time of constructing new property.
  3. If total residential houses owned by your father is two (including new property), he should not buy another one within next three years of construction. Or in next three years, total owned residential houses should not be more than two.
  4. New property should not be sold before next three years.

Selling a house property before possession & registration does not amount to owning a property. It will be considered as short term gain from other assets.

answered Oct 22 '11 at 18:15 by pankaj 5.2k320

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Asked: Oct 21 '11 at 14:37

Seen: 1,294 times

Last updated: Oct 22 '11 at 18:15