Selling 2 smaller flats and purchasing a bigger flat – How to handle Capital Gains Tax ?

POSTED BY Sudha Baisantry ON April 10, 2014 11:47 am COMMENTS (11)

We want  to sell 2 smaller  flats and purchase a bigger flat. The flat we wish to purchase is second hand. I wish to know

1) Can the proceeds of sale of 2 flats be invested into a single purchase as mentioned above. what is the implication on Capital Gains Tax. sec 54 of IT act.

2) Does the Sec 54 allow investment  of the gains only on a new construction or can we purchase a second hand flat also.

Regards

Sudha

11 replies on this article “Selling 2 smaller flats and purchasing a bigger flat – How to handle Capital Gains Tax ?”

  1. ashalanshu says:

    Dear Sudha, thanks for your praising words. Please share your knowledge with your friends and relatives also.

    Thanks

    Ashal

  2. Sudha Baisantry says:

    Thank you so much. Sincerely appreciate the prompt and clear responses. and may I add untiring.
    Kudos to the yeomen service by Jago Investor. I have gained so much. I have now made it a habit to set apart an hour every day to go through your articles/ forum There is a wealth of knowledge ,
    THANKS AGAIN.
    Regards
    Sudha

  3. ashalanshu says:

    Dear Sudha, the date of first receipt for your payment or any agreement between you and your builder is the date of your rights on property. Hence CG calculation should be started from this date. As your payment s are spread out over 3 FY, you need to calculate your CG on each payment date.

    For more info, please contact me over my personal mail.

    Thanks

    Ashal

  4. Sudha Baisantry says:

    Dear Ashal,
    Thanks and more questions for you.
    1 What is treated as date of purchase – date of registration or the date of final payment and taking possession. Normally the UDS is regd and it may take even more than a year for final payment and taking possession. In our case we regd the property in 2003 but the final payment and possession is happened only in 2006.
    2 How will Capital gain be treated when it is a joint property. The sale deed mentions both husband and my name- no share is indicated. The loan was also a joint loan .
    Thanks
    sudha

  5. ashalanshu says:

    Dear Sudha, my pleasure. Please keep asking.

    Thanks

    Ashal

  6. Sudha Baisantry says:

    Thanks a lot. Thanks for the clear concise replies and the patience in answering the queries.
    Regards
    Sudha

  7. ashalanshu says:

    Dear Sudha, the section 54EC bonds are to be redeemed after initial holding period of 3Y. the basic amount is tax free now but the interest received in these 3Ys is taxable.

    Thanks

    Ashal

  8. Sudha Baisantry says:

    Dear Ashal,
    Thanks a lot for the clarification. Sorry I did not acknowledge earlier.
    What abt the bonds, can we redeem the investment after 3 yrs ( without ny tax implications )
    Regards
    Sudha

  9. ashalanshu says:

    Dear Sudha, if you are constructing a house, of course it ‘ll be a new house but if you are purchasing a ready built house, it can be 2nd hand property also. No issue on that part. As one of the house was under home loan since 2002, no problem to sell it now. Interesting thing is you can avail interest benefit for April 2014 month also. 🙂

    Thanks

    Ashal

  10. Sudha Baisantry says:

    Dear Mr Ashalanshu,
    Thanks a lot.
    Sorry to ask you more questions. But IT seems very confusing.
    1) My question on whether we can invest in a second hand property was because in Sec 54 it states “new residential house ” constructed within 3 years, or purchased 1 year before or 2 years after the date of transfer.
    2) if I do not invest again in real estate , then we can invest in bonds issued by the Rural Electrification Corporation and the National Highways Authority of India.
    a)This needs to be done within 6 months of sale and IT needs to be duly notified
    b) can we sell/ redeem these bonds after 3 yrs.
    c) We can invest in such bonds only to the maximum of Rs50 lacs.
    d) Only the capital gain needs to be invested and not the entire sale proceeds.
    3) One of the properties we are selling was under Housing loan . Loan availed in jan 2002 and closed in April 2014. I have claimed 80c relief and relief for interest until March 2014. Will this in any way impact the tax workings on sale of property.

    Thanks in advance and apologies for so many queries.
    Regards
    Sudha

  11. ashalanshu says:

    Dear Sudha, let me try to answer your queries.

    1. Yes, you can adjust your capital gains from 2 properties against a single property.

    2. You can purchase new as well as old unit. No restriction on that.

    Thanks

    Ashal

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Download Our FREE Ebook!

Available only for first 100 people today

Download Our FREE Ebook!

Available only for first 100 people today