How to save tax on long term capital gains

Deep7885 1
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Dear Sir,

Me & my sister sold our ancestoral home in January 2010. We were the only owners as our parents & grandparents are no more. We sold the entire bunglow in Kolkata for 3.6 crores. The payment was made to us in two demand drafts of Rs. 1.8 cr one in my name the other in my sister's name. MY sister was married & settled in Mumbai while i stay in Kolkata.

Both of us invested 50 lakhs each in FY 2009-10 in REC bonds, & again 50 lakhs each in 2010-11 in REC bonds, as the max amount that can be invested in one FY is 50 lakhs. We split the payment over 2 FYs but within 6 months from date of sale of the property. My sister went on to buy a property & paid the balance 80 lakhs to the builder.

i on the other hand had not shortlisted any property, so i put the money (1.8 - .5 - .5 = .8 cr) in a long term capitals gains ac with SBI within 6 months of sale of our property.

My question is - i have shortlisted a property that i would like to buy for 90-95 lakhs, & would be doing so over the next 2 months, it will be a resale flat that i am buying. today in the newspaper i read that i had to purchase the property within 2 yrs from date of sale or construct within 3 yrs from date of sale. Hence, i might be liable to pay 20% LTCG tax on the amount i have in the SBI A/C for this yr. But some articles on the net say that since i have put the money in the SBi A/c for LTCG i can purchase the propert within 3 yrs & not 2 yrs. My 2 yrs from sale date ended this january & 3 yrs will end next Janury. Request your guidance & advice.

Thanks & Regards

capital-gain-account long-term-gains section-54 income-tax

also i hope that since we took seperate payments from the vendor , my LTCG is 1.8 & my sister's is 1.8.

assumed that cost of bunglow in negligible even after indexation

Deep7885•
1 Answers

As per section 54/54F you would need to get possession of new residential property within two years from date of sale. As date is already passed, you would have to pay income tax on unused capital gains.

Also pleas note that income tax is only applicable on long term gains and not on full amount. Say gains from property sale (computed with indexation method) was 1 crore and you already invested 1 crore into capital gain bonds within six months of sale, then there won't be any income tax applicable.

Say in another example, long term gain was 1.5 crore (out of 1.8 crore sale consideration), as 1 crore is already invested into capital gain bonds, 20% income tax would be applicable only on remaining 50 lakh (that's 10 lakh income tax).

I hope it helps!

Pankaj Batra5212
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