Investment of long term capital gain from sale of house property

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  1. Deepak1101

    Deepak1101 New Member

    I have just sold my house in Mysore and have long term capital gain from sale of house property. I am planning to buy a house or a plot of land to construct the house in Bangalore. Here in bangalore there are lot of properties at attractive prices but the problem is they do not have approval from the authorities (land use conversion to residential purpose is not available) but the localities are well developed and the prices are atleast 25% cheaper than the approved localities. If I buy a house or plot in such localities from my long term capital gain money does it qualify for income tax exemption?
  2. Manoj Mehra

    Manoj Mehra Active Member

    The income tax act allows exemption if the amount is reinvested in a Residential house.

    It nowehere states that the Residential House should be situated in a approved Residential Area. So, if you are using a plot of land as a Residential House - I think the exemption would be allowed.

    The above is only my interpretation of the law.

    Waiting for more people to share their views on this.
  3. Prof Bajaj

    Prof Bajaj New Member

    In my opinion, you have to reinvest in a residential house within 2 years or you may construct a house within 3 years i.e. The construction should complete within 3 years of the sale of first property.

    If there is a problem with approval, it will be difficult for you to complete the construction in stipulated time. Also, even if you complete the construction, you wont be able to prove it if you dont get the completion certificate from the approving authority.

    Advisable to prefer approved localities. Meanwhile you would be required to open a capital gain account and place the money in that account so that you do not have to pay tax.
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