Sir,
My father sold a plot in May 2010 for 9 lacs which is subjected to LTCG.
Me and my father jointly took the housing loan from LIC of Rs. 18 lacs to purchase a flat for which registration took place in March 2010 and possession of the flat was given in Jan 2011.
Can my father save LTCG arising by selling of the said plot by partial pre-payment of 9 lacs towards the housing loan for the flat?
As plot was sold, only section 54F or 54EC will be applicable for tax saving on capital gains.
As per section 54F, In order to save capital gain earned from selling plot, One can purchase a residential house within two years from the date of sale of the plot or a year before the date of sale of plot. Or a house is constructed within 3 years of selling plot. New investment should be equal or greater than the amount of Net consideration (selling price of plot). Also the person can hold only one house property other than the new exempted asset at time of buying new exempted property.
Also make sure that your father don’t buy any other new house property within 1 year from the date of transfer or constructs a new house property from 3 years from date of transfer other than the exempted asset.
As your father have already bought another residential property within 1 year of selling plot, income tax exemption is applicable. But his share in new flat must be more than selling price of plot in order to save full income tax.
And yes, he can repay loan for flat using sales proceed of plot.
Thanks a lot for your detailed answer.
One thing more to be clear. It means possession date of the tax exempted property should be considered while doing any date calculations for LTCG or is it the registration date of the exempted property?
Thanks, Akash
Ideally possession date should be used while computing LTCG. But You may consider any of these, Date of agreement/booking, date of possession or date of registration, as per your convenience. There have been court hearing in which these have been accepted.
