sood (Director) 04 May 2010

Capital Gains

I had sold a house in May 2008 and in Nov 2008 purchased a residential plot. After indexation Calculation no capital gain tax was not there and I was told that I should build a house on this plot within three years. Now I want to sell this residential plot (no house has been built on it yet) and buy a built up house instead. What shall be the whole situation with regard to Capital Gain tax in the first transaction and the second transaction. Please help

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3 Replies

AMIT BAJAJ ADVOCATE (ADVOCATE) 04 May 2010

If after indexation no capital gain arises there is no need to build house on the plot within 3 years. Ypu dont need any exemption u/s 54 to save capital gain tax since there is no capital gains.

If you sell the plot within three years it will be a short ternm capital gain and no benefit of indextion will be available and no exemption u/s 54f or 54EC etc will be available.

Vineet (Director) 06 May 2010

Agree with Mr Bajaj. If after indexation, there was no LTCG, there was no need to build/ purchase a new house for sole purpose of availing exemption u/s 54. However, if some fact is missing in the query and you have indeed availed any benefit of exemption u/s 54, such exempted amount will be taxed as LTCG in the year the said newly purchased plot is sold.

As far as sale of new plot is concerned, the capital gain arising is taxable as short term capital gain as you are selling the same within three years. No exemption is available against STCG.