Capital Gain tax on selling Residential Plot and Investing on Flat

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  1. Shubhabrata Khan

    Shubhabrata Khan New Member

    Myself and my Wife has purchased an under construction flat through an agreement in May, 2013. The possession will be on Dec,15.

    My wife has invested in a plot in Nov, 2010 and sold the residential plot on Jan,2014. The Money received through selling the plot has been reinvested in the newly purchased flat.

    My wife is about to file the income tax for the financial year 13-14. Kindly advice should the long capital gain tax to be paid or it will be exempted as the capital gain has been invested in residential flat.
  2. gaurav_kumar

    gaurav_kumar Well-Known Member

    Capital Gains exemption under Section 54 is only allowed in case of a Residential House and not for a Residential Plot.

    However, exemption under Section 54F is allowed for assets other than Residential House as well.

    So please confirm whether it is a Residential House which has been sold or a Residential Plot which has been sold.
  3. Shubhabrata Khan

    Shubhabrata Khan New Member

    The residential Plot has been sold.
  4. gaurav_kumar

    gaurav_kumar Well-Known Member

    As the asset sold is a Residential Plot, therefore Section 54 will not be applicable and Section 54F would be applicable.

    The difference between Section 54 and Section 54F is that in case of Section 54 - only the Capital Gains is to be reinvested and in case of Section 54F - the whole sale proceeds have to be reinvested.
  5. gaurav_kumar

    gaurav_kumar Well-Known Member

    Exemption would be allowed in your case as you have made the reinvestment within the time allowed.

    In case the Cost of Acquisition of the new flat is equal to or more than the Sale Price of the Plot - No Tax is required to be paid

    In case the Cost of Acquisition of the new flat is less than the Sale Price of the Plot - you would be required to pay tax on the difference between Sale Price of Old Plot and purchase price of New Flat.

    The rate of tax in this case would be a flat 20%
  6. Shubhabrata Khan

    Shubhabrata Khan New Member

    Sir, thank you a lot for the valuable advice.
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