How is LTCG taxed if property is offered to purchase a brand new home?

What would be the long-term capital acquire (LTCG) tax if proceeds from the gross sales of  property and any inherited gold  is used to purchase one other property ? 

— Name withheld on request

We perceive that you’ve got earned long-term capital positive aspects (LTCG) from the sale of the residential home property and inherited gold and intend to speculate the sale proceeds in one other residential home property to say a deduction in opposition to the LTCG. 

Section 54 of the Income Tax Act of 1961 gives for exemption in opposition to the LTCG arising from the sale of a residential home (authentic asset). This exemption is offered the place the quantity of LTCG arising from such sale is both invested to buy one other residential home (new home) inside 1 12 months previous to or 2 years of the switch of the unique asset or the identical is invested to assemble a brand new home inside 3 years of the switch of authentic asset. The exemption can be obtainable to the extent of LTCG invested.

a. Section 54F of the Act, gives for exemption in opposition to the LTCG arising from the sale of a capital asset aside from a residential home (being gold in your case). This exemption is offered solely when the online proceeds arising on account of the sale of a capital asset (i.e. gold) are invested to buy a residential home (new home) inside 1 12 months earlier than or 2 years after the sale of gold or the online proceeds are invested to assemble a residential home property inside 3 years from the date of sale of gold. The individual claiming the above exemption shouldn’t maintain multiple home (aside from the brand new home) on the date of sale of the unique asset. Where all the internet sale proceeds will not be invested and solely an element is invested, the exemption u/s 54F can be obtainable solely on a proportionate foundation.

Income tax provisions don’t place any restriction that the LTCG from sale of property and sale proceeds from every other capital asset (being gold in prompt case) can’t be invested in the identical residential home for the aim of claiming the deduction underneath the Act. This can also be supported by judicial precedents. Thus, you could make investments the funds acquired from sale of property and gold to buy the brand new residential property

LTCG from the sale of home and gold can be tax exempt, topic to success of all different circumstances prescribed. Any GST/ oblique implications on such switch ought to be examined individually.

Parizad Sirwalla is accomplice and head, world mobility providers, tax, KPMG in India.

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