LTCG saved by construction of house

Sam 1
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Dear Sir,

I have sold residential land for Rs.1.20 crore in Feb 2011. According to the government circle rate, the value of the property comes to Rs. 1.53 crore. So I understand that the LTCG that I have to pay will be on Rs. 1.53 crore which is the circle rate value of the property and not the actual value of the sale.

I bought 54EC bonds of REC and NHAI in March 2011 and May 2011 of Rs. 50 lakh each as the six month time limit in my case was spread across 2 financial years. Thus, Rs 1 crore is now free of LTCG.

I am now considering constructing a house in my name. I have only Rs. 20 lakh left from the sale of the property. However, as the govt. value is higher, I am still liable to be taxed on Rs. 53 lakhs.

My question is that if during the construction of the house I use Rs. 20 lakh that I have from the sale of my property and another Rs. 33 lakh from my own money (currently invested in fixed deposits) that I have saved over the years, will I be able to claim a LTCG tax exemption for the entire Rs 53 lakhs or just Rs. 20 lakhs would be LTCG tax exempt?

Also do I then need to deposit this money in a Capital gains account until the house is constructed or can I put it in a regular savings account?

Thanks in advance for your advice.

section-54ec residential-plot long-term-gains ltcg income-tax
1 Answers

First of all, I am not sure if benefits from both section 54EC and 54F can be availed simultaneously. As you have already invested in Capital gain bonds, not sure if you are eligible to construct a new house and get exemption on that too.

If this is allowed then even If you spend 53 lakhs from your own savings, then also you should be able to save tax on capital gains.

You will have to invest in capital gains savings scheme account until the same has been used for new property.

Pankaj Batra5212
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