Sale Proceeds from a Plot

The exemption from the taxability of capital gains on the sale of a plot and its consequent investments in the purchase of a residential flat will have to be claimed under Section 54 F of the Act. The major differences between Section 54 and Section 54 F of the Act are — Section 54 applies where a residential house is transferred and the capital gains arising on such a transfer are invested in the purchase or acquisition of a residential house. The acquisition of the house has to be within the period of one year before, or two years after the date on which the transfer of the residential house took place.

Section 54F is applicable where the capital gains arises from a long term asset other than the residential house and the investment is made in the acquisition or construction of a residential house.

Under Section 54F of the Act net consideration is required to be invested instead of capital gains. The exemption under this is allowed only if the assessee does not own more than one residential house, other than the newly acquired residential house.

I agree with Vishal

You can go ahead with the plans and buy a residential flat to avail exemption u/s 54F. The only precaution is that the entire sale proceeds are to be invested in new property to claim exemption of the full capital gain otherwise only proportional exemption will be allowed.

Yes you have to deposit the sale proceeds in Capital Gains account if the purchase of new flat does not happen before the due date of filing of return of the relevant assessment year. As you propose to purchase new flat in June 2010, there will not be any need for capital gains account.

"1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,-"

If I book a flat which is under construction and the builder shall give me possesion in two years from now, in that case I shall get the time limit of two years or three years?