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Sanjeev Kumar Joshi (DAO)     08 March 2013

Sale of plot for construction of house

Dear Lawyers,

I had purchased a plot from PUDA during the year 2008 amounting to Rs. 2,35,000 and the payment was made in installments which were cleared during 2012 amounting to a total Rs. 2,75,000. I sold the plot during the year 2012 for Rs. 6,00,000 and the amount was deposited in savings bank account. This amount has now been utilized for construction of residential house during the year 2012 itself. How the tax liability will be evaluated and what I have to show in my income tax returns to save myself from property income tax?

Regards,



Learning

 4 Replies

Rama chary Rachakonda (Secunderabad/Highcourt practice watsapp no.9989324294 )     08 March 2013

 

 if a property is sold within three years of buying it, it is treated as a short-term capital gain. This is added to the total income and taxed according to the slab rate.

 

Rama chary Rachakonda (Secunderabad/Highcourt practice watsapp no.9989324294 )     08 March 2013

 

However, if you sell a property after three years from the date of purchase, the profit is treated as a long-term capital gain and is taxed at 20% after indexation. While you can avail of various tax exemptions in case of long-term capital gains, no such benefit is provided for short-term ones.

One of the advantages associated with long-term capital gains is the inclusion of indexation while determining the profit. Indexation is a method through which the seller is able to inflate the value of his assets. Since inflation reduces the value of an asset over time, it is essential to increase the initial cost of the house to calculate its current value. 

Sanjeev Kumar Joshi (DAO)     09 March 2013

Dear Mr. Chary,

Thanks for your reply.

But what I want to know is that I have invested the money in construction of house within three years of sale of plot and did not open Capital Account in the Bank for the purpose as required under the I/Tax rules.

Velayutham Visvanathan (Since no Organization or Firm hence no designation)     08 April 2015

Try to add value to the discussion, with your each post.


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