LTCG ON LAND SALE

vishal 1
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Hello, Find ur answers very informative and helpful, keep the good work going!! There is a residential plot on my wife's name which we want to sell now- CP: 9,00,000 and SP: 15,00,000. We want to purchase one ready-to-move-in flat in delhi for Rs.15,00,000 on joint name of me and my wife,on which i am planning to take home loan of 12,00,000 rs.on my name for tax benefit? so, can we avail LTCG exemption? If not, is there any other way? can we buy another flat only in her name to avail full LTCG exemption? Do we need to invest full 15,00,000 rupees? Thanks

land-sale section-54f residential-plot long-term-gains capital-gains income-tax
1 Answers

It won't be good to comment without knowing purchase year, But explaining it for your understanding.

If there is not a difference of three years between buying and selling year, it will be a short term gain, whole gain will be added to taxable income and taxed as per slab rates. No exemption is available for this type of gain.

But if situation is not as per above, long term gain will be applicable. In this case, income tax will be 20% on gains with indexation benefit.

Section 54F may be applied to save income tax on LTCG. Under this section, one can buy a residential house within two years from sale or within one year before sale. To save tax fully, whole sale consideration amount (15 lacs in your case) would have to be invested into new property.

If the new house in joint names, cost of your wife's share should be more than or equal to 15 lacs. In case this amount is less income tax would be applicable @ 20% on amount = LTCG - (LTCG x (share in new property cost/whole sale consideration of plot))

Section 54F has some condition for applicability. These should be followed:

  1. Possession of new property must be taken within two years from sale of old property. Or new house can be constructed within three years of sale.
  2. Your wife should not be owning more than one residential house(flat/house/apartment) at the time of buying new property.
  3. If total residential houses owned by your wife is two (including new property), she should not buy another one within next three years of purchase. 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.

Income tax can also be saved u/s 54EC by investing whole sale consideration into capital gain bonds (issued by NHAI and REC).

Pankaj Batra5212
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