Exemption from Capital Gains Tax on Sale of a vacant Plot of Land

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  1. Ramakrishnan V

    Ramakrishnan V New Member

    Dear Sir/Madam,

    My name is Ramakrishnan and I am a NRI working in Dubai, United Arab Emirates. I have at present one house property in Bangalore, jointly owned by me and my wife, and both me and my wife are assessed to Income Tax on the rental income arising from the on a 50% each basis. Besides this we jointly own two vacant plots of land, one at Kodaikanal hills and the other at Sholinganallore Chennai. We also have our own house property in Dubai where we are staying.

    If we sell our vacant plot of land other at Sholinganallore Chennai and reinvest the entire sale proceeds in another house property will we liable to Capital Gains Tax as we have only one house property in India. Section 54 of the Income Tax does not mention anywhere about property held outside India for the purpose of calculating and limiting the total number of house properties to two claiming exemption from Capital Gains Tax on sale of vacant plot of land and reinvesting the sale proceeds in another house property. It only says that reinvesting the Capital Gains on a house property outside India is not recognized for claiming exemption from Capital Gains Tax on sale of Property.

    I request you to clarify this point.

    Regards

    V. Ramakrishnan
     
  2. rudrabose

    rudrabose Active Member

    Dear Sir

    Section 54 does not put any limit on the no. of House Properties of an Individual

    However, Section 54F does put a limit on the no. of House Properties of an Individual. Section 54F does not specifically mention whether the house should be in India or abroad and in the absence of any specific guideline, your house outside india would also be considered.
     
  3. Ramakrishnan V

    Ramakrishnan V New Member

    Dear Shri Rudrabose,

    Thank you for your clarification on the subject. I need your views on Investing the Capital Gains on NHAI or REC Bonds. As per the guidelines a maximum of Rs 50 Lakhs can be Invested in these Bonds or Rs 1 Crore if the sale is made between October to March the following Yeaer.

    My query is if I Invest the Capital Gains (permissible amount) in one of these Bonds and redeem after 3 Years am I completely exempt from Capital gains Tax in relation to that sale transaction?

    Also, are these Bonds redeemed immediately like a Bank Deposit or do I have to sell them in the secondary market to realize the sale proceeds?

    I shall be grateful if you can share your views.

    Rgds

    Ramakrishnan
     
  4. rudrabose

    rudrabose Active Member

    The Capital Gains arising on the sale of property would be exempted if invested in these capital gains bonds under Section 54EC.

    However, the interest that arises on these capital gains bonds would be taxable as per your income tax slabs.
     
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