Reinvestment in new property to save Capital Gains Tax

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  1. Ratan

    Ratan New Member

    I sold a property after nearly 18 years of possession on 04 Nov 2014. I had invested in a new property from a private builder under construction linked payment scheme by signing an agreement on 12 Jun 2013. Booking amount of 11.61 Lakhs was paid on 09 May 13 and first instalment was paid on 17 Jul after signing the agreement. I am now paying instalments as per the progress of construction.

    My question is that if I deposit the full sales proceeds of my old house which is less than the cost of new house, now ie in Nov 2014, would I be entitled to exemption of capital gains tax, considering that even though the agrement for acqusition was signed more than one year before the sale of the old house, I am still paying the instalment. If not, would I be entitled for Capital Gains exemption for the amount that I have paid or I shall be paying since 04 Nov 13 (ie one year prior to date of sale of old house)?

    Ratan Kumar
     
  2. gaurav_kumar

    gaurav_kumar Well-Known Member

    1. You only have to reinvest the amount of Capital Gains which you earned on sale of your old property and you dont have to invest the total sales price of the old property.
    2. The exemption from Capital Gains is allowed if the new property is purchased 1 year before or 2 years after the sale of property. The date of purchase would be date on which the agreement is registered with the local authority i.e. the date on which sale deed is registered. If the sale deed was registered more than 1 year back in that case the the exemption wont be allowed.
     
  3. Ratan

    Ratan New Member

    The sale deed of new property is not yet registered as the property is still under construction. We signed an agreement but that is also not registered yet. So could you clarify the law in this situation.
     
  4. gaurav_kumar

    gaurav_kumar Well-Known Member

    In such cases, the date of agreement would be considered as the date of purchase as this agreement has given you a right over the property.
     
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