In August 2010, My father sold his house in south delhi for 63 lacs and out of that money he has booked a villa in noida extension for 56 lacs. Remaining money he kept aside to pay for e rented accomodation for 2 years thinking that our villa will be available by aug 2012 as promised by the developer. But now after all the drama, he is extremely depressed. What shall we do?
1 Answers
First you should compute long term gains from the house sale with following rules:
Purchase Year = A, Purchase Cost = P, Cost Inflation Index (CII) for purchase year = X
Sale Year = B, Selling price = Q, CII for sale year = Y
Indexed Purchase price = P x (Y/X) = R
Long term capital gain = Q - R = S
Now as per section 54, in order to save tax fully, one should buy a new residential house property for price more than gains (S). Say gain amount is computed as 30 lacs, then if possession for a new house/flat is taken before Aug 2012, for buying price more than 30 lacs, there won't be any income tax. This amount can also be spent in construction of new house but construction must be completed before Aug 2013.
Also, income tax can also be saved by investing into capital gain bonds u/s 54EC.
Its better to buy a ready to move property, in case somebody is looking for capital gain tax saving. In today's market, no builder can be trusted for timely delivery of new properties.
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