Money

How Is Ltcg Taxed If Property Is Sold To Buy A New House?

What would be the long-term capital achieve (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 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 supplies for exemption in opposition to the LTCG arising from the sale of a residential home (unique 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 year 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 unique asset. The exemption will likely be out there to the extent of LTCG invested.

a. Section 54F of the Act, supplies for exemption in opposition to the LTCG arising from the sale of a capital asset apart 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 year 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 particular person claiming the above exemption mustn’t maintain a couple of home (apart from the brand new home) on the date of sale of the unique asset. Where your entire web sale proceeds aren’t invested and solely a component is invested, the exemption u/s 54F will likely be out there solely on a proportionate foundation.

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

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

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

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