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Srinivasan   06 March 2016

Capital gains - reinvesting proceeds in property

Dear Forum Members

I had sold a property in June 2013 and out of the Capital Gains arising out of the sale of the property, I have invested in land and building. As per the Income Tax Act I had to invest Rs 46 Lakhs either towards an apartment by June 2015 or buy a land and construct a house by June 2016 to avoid paying Capital Gains Tax

I bought a vacant land in September 2015 for Rs 90 Lakhs (much more than the Capital Gains that I needed to invest as this is the only land I could afford in the fringes of the city) and commenced construction in November 2015. On completing the foundation and plinth I ran out of funds and I could not complete the construction. As per the Income Tax act I need to have completed the house construction by June 2016. But there is no way I can complete the construction by June 2016 as I do not have the necessary funds to complete the construction. At best I can put a roof cover using asbestos or roof sheets and make it a partial dwelling unit

I have an Electricity Connection and a certificate from the contractor for completing the foundation and plinth. Is this good enough for Income Tax or would I have to pay Capital Gains tax as I have not completed a house or a dwelling unit

Suggestions from experts will be appreciated


Srinivasan Krishnan



 1 Replies

k.chandrasekharan (advocate)     15 March 2016

Put up an one room tenament with a toilet. Construction can be with bricks and mud with cement plastering only. Lime whitewashing would do. Connect electricity and waterline.For roof, use asbestos sheet. Cost of construction will be minimal. Apply for municipal tax assessment. All these can be done in one month's time.

Declare in your IT return compliance of tax provision on capital gains.

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