Best option amongst the avaialble options

Hello, Mr. Pankaj. Here is a brief of my case. My queries are at the end.

  1. Property A: I have this joint ancestral property with my mother, namely a flat, since 2-3-2005 which is being used by my sister for residence purpose. I plan to retain this ancestral property.
  2. Property B : I have this residential plot which was allotted on 28-4-2005 for Rs.6,12,000/-. The current sale value is about Rs.25 Lakh. I plan to dispose off this plot.
  3. My investment options are as under:
    a. Property C : I am a member of this Co-Op House Building Society for allotment of a plot, since Dec 2007. The plot is yet to be allotted. I have taken a loan of Rs.15.1 Lakh from a bank. What is more beneficial in this case if I sell plot (Property B) and use the proposed sale consideration amount of Rs.25 Lakh for : i. Either Paying off the loan of Rs.15.1 Lakh taken for Property C; or ii. Constructing a house on this Property C, which is possible only after allotment of plot, which is expected by March 2014.
    b. Property D: I have been allotted this under-construction floor (flat) by a private builder on 1-6-2012 for which I have taken a loan from bank. The construction is expected to be over by Dec 2013.The loan is construction linked. I have been sanctioned a loan of Rs.30 Lakhs and disbursement as on date is Rs.13.7 Lakhs . Can I avail tax exemption if I sell the plot (Property B) before 31-5-2013 and use the proposed sale consideration amount of Rs.25 Lakh to pay the bank loan of Property D?
    c. Any other option suggested by you.
  4. My queries are:
    a. In case of sale of a plot (Property B) as mentioned at 2 above, do I have to invest full sale consideration amount of about Rs.25 Lakh to avail long term CG tax exemption?
    b. What is the best option for me for availing tax exemption out of the options 3(a)(i), 3a(ii) and 3(b) or any other option which you may suggest. My personal preference is 3a(ii). Kindly advise and thanks for your patient reading.

asked Jan 26 '13 at 00:31 by Singh874 11


You would be eligible to claim tax benefit u/s 54F as you already own only a single residential house property (flat/built-up house) in your name (jointly with your mother) at the time of sale of plot.

But as per conditions u/s 54F, you cannot own more than two residential properties in next three years as well. So if you decide to construct house on property C, you should avoid getting possession for flat D. In case you get possession for flat D, don't construct house on plot C in next three years of possession.

To save income tax fully in case of section 54F, you would need to invest atleast sale consideration amount into new property (25 lakhs in your case).

In case you sell plot after March 2013 and get possession of flat D before March 2014, it would be best. As you would not even need to open capital gain scheme account to deposit sale consideration of plot.

There is no issue in paying bank loan from sale consideration of plot, as it was taken for new residential property purchase only.

answered Jan 26 '13 at 01:11 by Pankaj Batra 5.2k320

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Thanks, Pankaj for such a quick and clear response. Under such conditions, I will prefer to take possession for flat D, and won't construct house on plot C in next three years of possession. In that case, as advised by you, to save income tax on capital gains , I will have to buy a residential property (Property D- Flat under construction) within two years of sale of plot (Property B-Plot being sold) or within one year before sale. Just for clarity on the finer points: 1. What will be the date of sale of Property B (plot to be sold): a. Is it date of taking token money from the buyer?; or b. Is it date of registry? 2. What will be the date of purchase of Property D(Flat under-construction : a. Is it date of allotment by the builder?; or b. Is it date of possession?
(Jan 26 '13 at 20:05) Singh874
Date of sale of property is always possession date. In case you don't provide possession letter for plot, registration date would be transfer date. For flat also it would be possession date received.
(Jan 26 '13 at 20:11) Pankaj Batra

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Asked: Jan 26 '13 at 00:31

Seen: 1,239 times

Last updated: Jan 26 '13 at 20:11