tax on capital gain
srlaksminarasimman
(Querist) 01 January 2010
This query is : Resolved
Respected friends,
Kindly clarify my following query.
A owns residential plot of land at two places namely at place X and place Y. He decides to sell land at X and out of the sale proceeds , he wants to construct a warehouse ( for commercial purposes) at place Y. The exemption from tax on capital gains arising on the transfer of residetial land can be availed only if A constucts or buys a residential house/ flat ( residential) and exemption is not available for constucting a ware house for commercial purposes.
Is it correct
regards
sr laksminarasimman
A V Vishal
(Expert) 01 January 2010
There is no exemption available on the capital gains arising out of sale of a residential land by purchasing another residential land.
You can claim the exemption under section 54EC, of the Income Tax Act, by parking the amount of capital gains arrived at after indexation into capital gains tax-saving bonds of REC or NHAI within six months from the date of sale of the land.
Note that there is a limit of Rs 50 lakh per financial year for investing in the bonds.
You can also claim the exemption under section 54F by purchasing a residential house within two years or constructing it within three years by investing the entire sale proceeds.
Investment of lesser amount will earn proportional exemption.
srlaksminarasimman
(Querist) 01 January 2010
DearMembers,
I thank Mr.Vishal for his advice. My precises query is under Section 54 of the Income Tax Act , capitl gain arising from the transfer of rsidential house property ( which includes residential land also) is exempt if the assessee has purchased a rsidential house within a period of one year before transfer( or within a period of two years after the date of tranfer) or has constructed a house property with in aperiod of 3 year after the date of transfer.Whether the exemption is available under the IT Act if one decides to constuct a warehouse (commercial purposes) out of the capital gains realised
regards
sr laksminarasimman
Vineet
(Expert) 01 January 2010
No sir you cannot claim exemption appropos your query.
First of all your case is not covered u/s 54 at all as you are selling a plot and not residential house.
For claiming exemption u/s 54F sale proceeds are to be deployed in purchase/ construction of residential house. As you are constructing commercial ware house, exemption u/s 54F is also not available to you.
soumitra basu
(Expert) 01 January 2010
I also do agree with Vineet
