House Selling or Exchange Tax

We have a house in West Bengal which is estimated at 60Lakhs.
We are plannning to sell it.

Case1: We sell it and Pay appropriate taxes
What would be our inhand cash in the end.

Case2: Exchange
Now instead of selling it is the below possible
We ask the buyer to purchase 2 flats of 30Lakhs each and transfer the ownership to us.
We transfer the ownership of our house to the buyer. What would the applicable taxes for this?

What would be the best? Any other suggestions?

Hey @tirtha9

In case-1, you can calculate the capital gains by deducting the indexed cost of acquisition from the sale proceeds. Indexed Cost of Acquisition is calculated based on the year you purchase the property and the year you sale the same. Tax will be levied on Capital gains based on Long Term or Short Term holding.

In case-2, it will be considered that instead of money, you have taken flats against sale of the house. The value of flats will be considered as sale proceeds. Tax will be levied on the capital gains arrived at after reducing indexed cost of acquisition from sale proceeds.

Against sale of house, if you purchase another house you can claim exemption under section 54. Or if you invest in specified bonds, you can claim exemption under section 54EC.

Hope this helps!

Hello CA Niyati

Please correct my understanding

Yes I would like to avail section 54. Lets say the sale amount is 60L

  1. Then If I purchase another property at 60L this is fully exempted?

  2. Is there a rule that I need to purchase in same city or it can be anywhere in India?

  3. Is this purchase from sale proceeds needs to be a single or can be multiple, like say 1 flat of 15lakhs another 35 lakhs?

  4. Am assuming that this the sale and purchase needs to be done within the same financial year?

Hey @tirtha9,

Here’s an answer to your queries:

  1. You get exemption from capital gains and not the sale proceeds. In this case, you will get full exemption on the amount of capital gains.
  2. No, the only rule is it should be anywhere in India.
  3. The exemption is available only against one property. The maximum exemption can be claimed for 2 house properties the value for which should be less than ₹2 crores. This particular exemption for 2 properties is available only once in lifetime.
  4. No, the time period for purchase is 1 year before and within 2 years of sale.

Read more on Section 54: Exemption on Sale of House Property

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The house in question, I only have possession of the SaleDeed and the Occupancy certificate in my mothers name. We dont have any other documents such as blro, land registration, parcha, mutation etc.

I have tried many times to get the ‘parcha’ or land registration but failed.

I have interested parties who wants to buy without further documents, is there any way i can sell it like a sale deed or transfer affidavit etc?

If thats possible can i still take advantage of section 54? I would like to purchase a different property from the sale proceeds.

Hey @tirtha9,

Yes, on the basis of the sale deed of the property under question you can claim the exemption for Section 54. However, for cost of acquisition you need to have purchase details like date of purchase and purchase amount or the fair value of the property.

What I meant was that We havent sold it yet, we dont have BL&LRO mutation (or parcha as its called in west bengal). I only have the SaleDeed from the previous owner to my mother and the Occupancy certificate for the house from municipality in my mothers name.

So in absense of blro mutation

  1. will i be able to sell the house?

Please check the link here One lawyer is saying its possible another High court lawyer is saying by law mutation is must and not possible.
can you clarify?

  1. if yes what would be the process to sell, just a stamp paper execution of sale is fine?

  2. I am planning to avail the section54, so during sale and receive of the money from the buyer do I need to pay any tax immediately?

Hey @tirtha9

Quicko is a tax planning and filing platform, we can help with the queries around taxation. You can connect with a lawyer or a property dealer having knowledge of the same.