Capital gains on sale of plot

seemu 1
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Hi

I was alloted a plot for Rs 10.1 Lakh in January 2004 and with bank loan I acquired it. The EMI were paid from March 2004 . I got the lease deed done in March 2005. I sold this plot for 40 Lakh in Dec 2007.

My wife booked a small flat in May 1997 for Rs. 6.75 Lakh and with bank finance took possession in May 1998. However since it was much before our marriage she paid the EMI and could not get the registry done till the loan was paid in full in Sept 2005 and got the registry done in Aug 2006 after our marriage.She sold this flat for 14 Lakh in Dec 2007.

In May 2008 we purchased a house in joint name which was registered in joint name in June 2008 for 54 Lakh. The registry cost was about 5.7 lakh over and above the cost of house and we also took finance from the bank for 15 Lakh . The surplus money was spent in renovating the house.

Do either of us have to pay capital gains tax in this case. Pls advise.

residential-plot long-term-gains capital-gains ltcg income-tax
1 Answers

Computation for long term capital gains on sale of residential property/plot for both of you, has to be done separately.

Some assumption made:

  1. You both hold equal share in new property bought in May 2008.
  2. You don't own more than one property in your name while buying new house in May 2008.
  3. You won't own more than more than two properties (including the one bought in May 2008) in next three years.

Tax exemption will apply as per Section 54F in your case and as per Section 54 in your wife's case.

Lets first take your case: Residential plot is sold after keeping for more than three years (Jan 2004-Dec 2007), exemption is applicable under section 54F. New residential property is bought within a year of sale of plot, with your share ((54+5.7)/2) in new property exceeding the gains earned from plot. So capital gains from plot sale are fully exempt from income tax.

In your wife's case, flat was kept for more than three years (May 1997-Dec 2007), section 54 applies here for tax exemption. New residential property is bought within a year of sale of flat, with her share ((54+5.7)/2) in new property exceeding the gains earned from old flat. So capital gains from flat sale are fully exempt from income tax.

Pankaj Batra5212
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