Long Term Gain reinvested but in installments over a period of 3 – 4 years

POSTED BY Bhupinder ON February 21, 2011 4:20 pm COMMENTS (13)

I bought one Flat in 2002 say at X price & will be sold this year say at 5X . Now I invest this money in under construction Flat on Construction linked payment plan ( 3 to 4 Years ) . Will this income ( 5X – X ) be Taxable as I will not be investing full money at one go but in installments which will be paid over a period of  3 / 4  years ???

13 replies on this article “Long Term Gain reinvested but in installments over a period of 3 – 4 years”

  1. Bhupinder says:

    Thanks a lot !
    best regards

  2. bharat shah says:

    You need to take the cost inflation index of the year of sale, and divide it by the cost inflation index of the year of purchase to find the indexation factor.

    Indexation Factor = Cost inflation index of the year of sale / Cost inflation index of the year of purchase

    inflation index is declared by govt. every year, and you can get for previous yrs. from many sites easily. better you visit any good site for such calculation, and get wholesome idea of the matter. i am afraid to name the site as it may be against the norms of the forum/this site.

  3. Bhupinder says:

    Thanks , Now most of the things are clear . Just wanted to know how to calculate indexed cost of old Flat ?

  4. bharat shah says:

    i think, it is obligatory, no option. period starts from dt. of purchase/completion of construction. you may be aware only ltcg is required to be invested for such purchase, and not compulsorily whole sale proceeds, and ltcg is to be calculated on indexed cost of the sold house.

  5. bharat shah says:

    The new house that is purchased has to be held for at least 3 years from the date of purchase, or from the date of completion of its construction. one more thing, you may be knowing that the new house is required to be bought for only with ltcg (need not to spend whole sale proceeds), and that ltcg is to be calculated after taking indexed cost of the sold house. for getting exemtion of total ltcg. better you surf http://www.raagvamdatt.com for wholesome idea.

  6. Bhupinder says:

    Hello Again !
    Is it must or options ( not selling new house for 3 years ) ? Is this period start from date of booking of under construction flat or from possession or from last installment from this fund ?

  7. bharat shah says:

    then sake of record, one should not sell the new house for 3 years, otherwise you have to return the benefit.

    1. Bharat

      Which benefit ? Its 5 yrs limit to keep the 80C benefits on loan , sellling house before 5 yrs means loosing the 80C benefits which one has got earliar .

      Selling the house before 3 yrs will be bad for another reason , its that the profits will be short term gains and it will be added to salary . If you sell house after 3 yrs then you get

      A) long term capital gains with indexation benefits
      B) If you reinvest the capital gains in some other property then you dont pay tax on capital gains

      See latest article : https://www.jagoinvestor.com/2011/02/4-home-loan-facts.html


      1. bharat shah says:

        @manish chauhan
        i am talking about the benefit of tax exempted on ltcg tax on old house sale because of investing in new house purchase.for that one should not sell new house for 3 yrs. from dt. of purchase or competion of construction.
        i think,the post you referred is for the benefit under 80-c for loan taken for buy/constrction of home, and what is querried is a little different topic.

  8. Bhupinder says:

    Thanks . I need to collect maximum information so that I do not commit mistake.

  9. bharat shah says:

    i think , you need to keep your ltcg in Capital Gains Scheme of Deposit Account (CGSDA) (Also sometimes known as Escrow Account) till you pay for the construction within specified period and use it completely for the benefit.

  10. Bhupinder says:

    Hello !
    Thanks , You have replied very clearly.
    best regards

  11. jitendra solanki says:


    Any capital gains you earn from real estate should be invested either in capital gains bonds or in purchasing another real estate within two years time frame.If its a construction the money should be utilized within three years from the date you book the gain.
    Thus, if you are investing in a construction linked payment only three years payment will be considered for tax benefits.

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