Capital gains- exemption on purchase of property abroad

Dear Sir,

I have recently inherited a residential property which I propose to sell. Presuming that this transaction involves a capital gain of    Rs.3.00 crores as per the registration deed of the property.

Now, I propose to settle in Europe and run a business there. The country where I propose to settle has a condition that in order to get residential status there, I will have to make an investment in a business in that country.

I propose to involve myself in a business of running an informal ’bed & breakfast’ arrangement. I will buy a residential house in the European country where I propose to relocate and the building shall be a residential house in a residential area there. I will maintain my residence in that building and also use part of the building for my business. This part to be used for my business will not be formally designated as such and will be merged with my residence. It will be just like a Chartered Accountant uses one room of his residence in India for purpose of his profession. In case the cost of this residential building abroad is in excess of the capital gain of Rs.3.00 crores mentioned in para 1 above, will I be able to claim exemption on account of reinvestment for purchase of new residential house?

What will be the situation if I have to run my business in the form of a limited liability company abroad with myself, my wife and son as sole Directors and sole shareholders, I lease out part of or whole of the above new residential property to this family company abroad.

What if I form a company abroad and  invest money therein more than the capital gain above and the company purchases a residential house abroad from this money for my and my family’s use.


asked Aug 10 '12 at 21:54 by Headlines 1111

Section 54 would only be applicable for saving income tax if new residential property is purchased/constructed in India. As you want to buy property abroad, you can pay income tax on capital gains and then take out money from India.

answered Aug 12 '12 at 17:03 by Pankaj Batra 5.2k320


Sec 54 does not specify that property has to be in India.

answered Jun 20 '14 at 14:34 by harjeet 1


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Asked: Aug 10 '12 at 21:54

Seen: 3,090 times

Last updated: Jun 20 '14 at 14:34