Long Term Capital Gain treatment (2 Properties)

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  1. Chemburite

    Chemburite New Member

    In order to take the advantage of Section 54 of IT Act, whether you can dispose off 2 properties, namely one Flat and other a piece of Land and proceed can be utilised for purchasing a new Flat. The cost of new flat is expected to be higher than the combined realisation of old two properties?
    If yes, what action should be taken?
     
  2. rudrabose

    rudrabose Active Member

    Yes, you can sell 2 properties to buy a single property.

    For sale of flat - exemption can be claimed under Section 54
    For sale of land - exemption can be claimed under Section 54F

    As the amount invested in the new flat is more than the sale price of flat + land, therefore the whole of capital gains would be exempted from the levy of tax.
     
  3. Chemburite

    Chemburite New Member

    Thanks Rudrabose for quick response.

    I have booked the new flat and in the process of disposing the old properties. I have following queries for which I need your support:
    - Is there any action I need to take beforehand?
    - The sale of two properties may happen at different times, whether It can be deposited in one account ?
    - What type of account it should be?
    - What are the timelines for using the proceeds for purchase of new flat?
     
  4. rudrabose

    rudrabose Active Member

    1. The new property should be purchased either 1 year before or 2 years after the sale of the property
    2. I would advise you to deposit the amount in 2 separate accounts as the amount is being received on sale of 2 different properties and exemption is being claimed under 2 separate sections.
    3. The amount should be deposited in a special account created for this purpose i.e. the Capital Gains Account. Kindly refer: http://www.charteredclub.com/capital-gains-account-scheme/
    4. The new property should be purchased either 1 year before or 2 years after the sale of the property
     
    swapna singh likes this.
  5. Chemburite

    Chemburite New Member

    Thanks once again for your quick response!

    Normally what would be considered as the date of Purchase of the new property:

    - Date of Booking of flat? (as I have already booked it)
    or
    - Date of Allotment letter? (Not been issued but expected shortly)
    or
    - Date of registration of the property? ( Any time in near future the same could be done)
     
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