Long term capital gain exception under section 54

POSTED BY Suman ON September 10, 2012 10:46 pm ONE COMMENT

Dear Sir,

Thanks for the wonderful forum. I have a question. Let me give an example to better describe the scenario. Appreciate your kind help in this regard.
1) Flat 1 under construction purchased on Aug 2005. Home loan taken.
2) Flat 1 completed in the year 2008. Loan continues.
3) Loan for Flat 1 foreclosed in the year 2011.
4) Planning to purchase another under construction property in 2012. (now) Under new home loan.
5) Expected date of handover of flat 2 is on year from now. Aug / Sep 2013.
6) I’ll consider sell of Flat 1 after getting possession of Flat 2.

I understand that the sell of Flat 1 will result in capital gain. My questions are as follows.

As I am going for a home loan for flat 2, can I set off the capital gain arising out of sell of Flat 1. I’ll reduce the loan amount by the capital gain arising out of sell of Flat 1. Please note that the buying price of flat 2 is much higher than the capital gain arising out of flat 1, in fact it is higher than the expected whole sell price.

What is the date of purchase of a property? I think it is the date on which the registration of sale deed takes place, after paying Stamp duty and registration fees to the government. Correct me if I am wrong. So even if I take a home loan for the second flat (Flat 2) now the actual date of purchase will be some what in late 2013 or early 2014. So if I sell the earlier one (Flat 1) with in one year of date of registration of Flat 2 and use the capital gain from Flat 1 to set off my home loan I should be eligible for exception under section 54, as setting off home loan is utilization of fund towards purchase of property.

Hope I have been able to express my concerns. Thank you once again.

Thanks in advance.

One reply on this article “Long term capital gain exception under section 54”

  1. Dear Suman, the simple thing for you. Please sell your flat 1 within 1Y of getting possession of flat 2 or sell it now to be eligible for purchase of flat 2 under section 54 automatically.



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