I’ve two small residential flats. One was purchased in 2001 and we lived in that till 2017, then moved to a smaller flat purchased in 2016 by taking housing mortgage. Now we need to purchase an even bigger home for self-usage and thus planning to promote our outdated 2001 flat in March 2022. The tentative Long Term Capital Gains (LTCG) on our outdated flat is about 65 Lakh (after indexation) and new flat will value us 160 Lakh. Please inform me whether or not I can take benefit of this capital acquire to purchase new home for private utilization? Please word I already personal one flat on the date of sale of the outdated flat. I’m a pensioner.
Since you might have offered the outdated flat after holding for greater than 24 months the earnings arising on sale of this flat are taxable as long run capital acquire. The tax legal guidelines have provisions for permitting exemption from tax on long run capital positive factors if funding is made sure specified belongings. As per Section 54 of the Income Tax Act, an Individual and an HUF can declare exemption from long run capital positive factors arising on sale of a residential home by investing the listed capital positive factors for purchasing one other residential home inside specified interval. The exemption is out there if the funding is made inside two years for purchasing a home. In case of self-construction of a home or reserving of an below building home an extended interval of three years is out there. The long run capital positive factors which aren’t so invested by the due date of submitting of the Income Tax Return (ITR), the unutilised quantity is required to be deposited in an account below capital positive factors account scheme and which can be utilized for making fee for buying the residential home inside the specified time interval. In case the quantity shouldn’t be utilised inside prescribed interval, the identical turns into taxable within the 12 months during which the interval so expired.
There are not any restrictions on the variety of residential homes you’ll be able to personal on the date of sale of the property to be eligible for claiming exemption below Section 54.
Since you might be planning to speculate greater than the listed long run capital positive factors, you’ll not have any tax legal responsibility. However in case full long run capital positive factors aren’t invested, the exemption will probably be accessible to the extent of funding and on the steadiness you’ll have to pay tax at flat price of 20%.
So in case you promote your flat by thirty first March 2022, you’ll have to purchase the brand new flat by thirty first July, 2022 which is your due date for submitting of your ITR. In case you aren’t ready to take action you’ll have to deposit the unutilised cash within the capital positive factors account. If attainable, I’d advise you to execute the settlement within the subsequent 12 months in order that you’ll have longer interval until thirty first July 2023 accessible to you for investing the LTCG.
Balwant Jain is a tax and funding skilled and might be reached on [email protected] and @jainbalwant on Twitter.
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