Capital Gain on Sale of Plot without Constructing House

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  1. Bena

    Bena New Member

    Can a residential land (plot purchased for constructing an independent house) be sold before constructing any house thereon and capital gain made out of the sale used for purchase of a residential flat in a multistory building? Are both the OLD and the NEW Asset be considered as Residential properties?
  2. gaurav_kumar

    gaurav_kumar Well-Known Member

    The old plot which has been sold will not be considered as a Residential House and therefore Section 54 will not be applicable.

    In this case, Section 54F would be applicable.

    The difference between Section 54 and Section 54F is that under Section 54 - only the capital gains is to be reinvested whereas under Section 54F - the total sale proceeds are required to be reinvested.
  3. Bena

    Bena New Member

    Thanks a lot for the kind advice.

    The above 2 plots (same size and adjacent to each other) are situated in a gated residential property, which is divided into 70 villa plots. I intend to sell the above two NA plots (purchased in 2001) for a sale price of approx. Rs 30 Lakhs+ Rs 30 (Rs 60 lakhs) during the current FY.

    In May 2014 I booked 2 Residential flats in a multistory building. Agreement was signed in August 2014. (Self and spouse own 1 flat each. Owners name can be changed if we so desire before the Registration of the property.) Regn and stamp duty payment will be done upon completion of construction, as per the terms of Agreement. Approx purchase price is Rs 40 lakh + Rs 30 Lakh (Rs 70 Lakhs). As per the agreement terms Rs 27 lakh + Rs 24 lakh have already been paid based on the construction progress. Balance to be paid in another 2 years.

    Could you kindly advise the procedure to be followed for making payment from the capital gains considering that a substantial amount has already been paid?

    I own another residential house other than the above. Section 54 stipulates purchase of 1 residential property. Would the 2 flats in the same building be treated as 1 res property? If only 1 res flat (say Rs 40 lakh) can be purchased from the capital gain made, can I invest the balance 20 lakh in REC Bonds?

    Me and my spouse are retired.

    Would be grateful for advice.
  4. gaurav_kumar

    gaurav_kumar Well-Known Member

    1. The reinvestment should be done in the name of the same person who has sold the asset. Therefore, the reinvestment should be in your name.
    2. The 2 plots sold would be considered as 2 separate plots and not as a single plot because registration of both the flats would be different. In the records of the govt., these are 2 separate plots.
    3. You can only invest in a single house to claim exemption under section 54F
    4. The balance amount can be invested in bonds exempted under section 54EC and exemption can be claimed for that as well.
  5. sureshyerunkar

    sureshyerunkar New Member

    I have query.
    If I sell one of my flat and use that amount to prepay bank loan of my own second property-flat , will any Capital Gain Tax be attracted ?
    Please advise.
    I would be grateful if you could send me e-mail on
    [email protected]
  6. gaurav_kumar

    gaurav_kumar Well-Known Member


    So, if the house has been purchased by you 1 year before or 2 year after the sale of property - then you can claim the capital gains exemption.
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