Can I purchase a residential flat before selling a plot of land and get benefit of LTCG?

Prabhu 16
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Hi Pankaj,

I have a plot of land which I had purchased for Rs. 8 lakhs 9 years ago and I am planning on selling the same plot for present market value between Rs. 70 to 80 Lakhs. I want to purchase a residential flat and would like to use the Long Term Capital Gain from this sale to purchase the new residential flat for Rs. 85 lakhs.

I have following queries which needs to be cleared:-

I already have 2 properties (not including the new redential flat) registered in my name. So if I sell a plot of land and buy a new flat (3rd Property) would I be able to take advantage of LTCG under sec54 or 54F to avoid LTCG tax? If not, Is there any way (legal) by which I can circumvent this provision made under the IT Act, 1961.

Can I purchase a residential flat first and later sell the plot of land and adjust LTCG from sale of plot somehow under LTCG? If yes how much time do I have to sell the plot of land once I buy a residential flat to take advantage of LTCG under IT Act? If not then, Once I sell the plot of land how much time do I have to buy a new flat to take advantage under this scheme?

What is the maximum amount of LTCG that can be invested in 1 year to avoid tax and Is FY calculated for this purpose? Some example given by you to enumerate my case would be very insightful. Thanks Prabhu

section-54f residential-plot long-term-gains capital-gains ltcg
1 Answers

As you already own two residential properties, you won't be eligible for tax benefit u/s 54F.

There are two workarounds to claim for tax benefit:

  1. You construct some portion on plot and sell it as house rather than a plot. This would qualify tax benefit u/s 54 and there is no condition of number of owned properties in this clause.
  2. You sell one of the already owned residential property so that total owned property count becomes one and 54F becomes applicable.

You can purchase residential property within one year before sale of plot and two years after sale.

There is no maximum amount of LTCG which can be invested to save income tax. However to save income tax fully, minimum whole sale consideration amount has to be invested in case of 54F and long term gains u/s 54.

Pankaj Batra5212
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