I sold my 13 years self-built house in Oct 2018 and before that I had Booked(executed sale agreement) another apartment in 2015 of total sale value of 1.02 Cr and got possession in Dec 2018. I claimed LTCG under section 54 and exemption was 71 L. I sold same apartment in mar 2021 without realizing that I am supposed to hold it for 3 years. Is there any investment I can make to avoid tax? Since I paid 90% of sale value of apartment by Feb 2018 can I consider that I held my apartment for more than 3 years because I paid more than LTCG(71L) of old house?
If the new house is sold before a period of 3 years from the date of its purchase/completion of construction, then at the time of computation of capital gain arising on transfer of the new house, the amount of capital gain claimed as exempt under section 54 will be deducted from the cost of acquisition of the new house.
For the purpose of section 54, the relevant date is the date on which assessee pays final consideration amount and takes possession of the flat and not on which substantial payments are made. So you cannot consider Feb 2018 even if you paid 90% of the sale value.
For other exemptions available for Income From Capital Gains you can refer to the below article:
Hi Divya, Thank you for the response. Understand that previously claimed/exempted( 71 L)LTCG will be withdrawn. But since I held this apartment more than 24 months, I hope I should be able to claim for LTCG on 71L if I purchase a new property which has price higher than 71 L or total sale value of 1.02 Cr. if not what should I do ? Should I pay STCG towards 71 L? If yes when should I pay? Are there any investments to avoid tax? Please suggest
Since you sold the property after 24 months from the date of acquisition, then the profit arising will be termed as LTCG. The benefit of indexation is available and will also get the advantage of paying the lower tax rate of 20%.
Further, you need to pay (self assessment tax) LTCG on transfer of property in the year in which it is transferred and the same is to be reported while filing Income Tax Return for the respective financial year.
You can invest into new house property to claim the exemption u/s 54 to reduce the tax liability on the same.
You can also claim an exemption by depositing the amount in Capital Gains Account Scheme (CGAS) before the due date of filing of ITR in the year of sale.
You can also claim the other applicable exemption of capital gains in your case:
Capital Gain Exemption under the Income Tax Act | Learn by Quicko
Hope this helps
Thank you and it helps. What I understood from your both responses that though previously claimed LTCG exemption of 71 L( on new property) will be withdrawn because 3 years lock in period is broken. But since I have held new property for more than 24 months, it is eligible for LTCG for the amount of 71L + latest Capital gain. Please confirm
Yes, since the amount of exemption will reduce from cost of acquisition it will eventually become a capital gain. The holding period of the property determines the nature of gain, thus the LTCG shall be 71 lakhs (exemption claimed earlier) and the actual capital gain post indexation.
Thank you for the response. So If I purchase new property( say sale value of 1.5 Cr) before July 31st(last date for IT2 submission), will I be eligible for section 54 exemption if I claim this LTCG amount( "71 lakhs + the actual capital gain post indexation) in ITR2 for AY21-22?
In order to claim exemption u/s 54 a new Residential House is to be purchased before 1 year or after 2 years from the sale of the residential House Property. So if you are able to purchase it before the filing of ITR you can claim the exemption in your ITR. However, if you are unable to purchase it in that duration you need to invest that money in CAGS Scheme i.e. Capital Gains Account Scheme and utilize when you purchase the property (within 2 years).
You can claim the amount invested in CAGS Scheme as exemption in ITR.
Hope this help