I Sold A Plot For Three Times The Cost Price. How To Save Capital Gains Tax?

I have bought a bit of non-agricultural land for 30 lakh on fifteenth April, 2022 which was purchased by me in year 2000 for 10 lakh. Out of  30 lakh, I want 10 lakh for completion of my home which is underneath development. Kindly recommend the most suitable choice to save lots of tax on the total worth of 30 lakh. Can I reinvest in a smaller piece of land costing about 16 to 18 lakh along with the 10 lakh in direction of completion of my home development to save lots of the tax? 

There are two choices for saving long run capital beneficial properties on sale of a non-agricultural land. You can both use one or each for claiming the exemption. First, exemption may be claimed underneath Section 54F by investing the sale consideration obtained on sale of the land for purchasing or developing a residential home inside prescribed time interval. For claiming exemption in respect of funding in an underneath development home, the legislation requires the home to get constructed inside a interval of three years from the date of sale of the land. The legislation doesn’t stipulate something about when the development of the home ought to have been commenced. 

So for my part, you may declare exemption in respect of capital beneficial properties attributable towards 10 lakh which you’re planning to make use of for finishing the underneath development home so long as the identical is accomplished inside three years from the date of sale of the land supplied you don’t personal a couple of home on the date of sale of the land. 

The quantity of ten lakhs which you’re planning to make use of for completion of the underneath development home must be utilized by thirty first July 2023. Any quantity remaining unutilised by thirty first July 2023 must be deposited with a financial institution underneath Capital Gains Account Scheme by that date. The quantity so deposited can be utilized for making cost for the underneath development home.

The second choice is obtainable underneath Section 54EC to spend money on capital beneficial properties bonds of any of the desired monetary establishments like Rural Electrification Corporation, National Highway authority, Indian Railway Finance Corporation and Power Finance Corporation inside six months from the date of sale of the land. Please observe that you’re required to take a position solely the listed capital beneficial properties attributable to the sale consideration of stability 20 lakhs. 

There is not any exemption obtainable from long run capital beneficial properties by investing in land except you want to get a home constructed on it throughout the prescribed time restrict of three years. Since you’re planning to say exemption in respect of your current underneath development home, you will be unable to say exemption underneath Section 54F once more for one more home.  

Balwant Jain is a tax and funding professional and may be reached on [email protected] and @jainbalwant on Twitter

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