Capital gain and home loan

The problem has to be resolved in the light of the provisions of Sections 54, 54EC, and 54F of the Income Tax Act 1961.

Presumptions: In  'booking a flat' presumbaly you have entered into a 'Construction Agreement' with the Builder to have the house/flat completed before 31-12-2014, wherefore you are constructing the house although through the Builder. It is also presumed that the 'property'  you propose to sell is a 'House Property' the income from which is assessable in your hands under the head 'Income from House Property', and that you held it for more than 36 months.

Reply: Option1.    If you sell the existing House Property before 30-11-2014 or on a date beforebefore (so that the construction of the new House Property would be within 3 years after  the sale of the existing House  Property), and the cost of construction of the new Flat is more than Rs 12 L (the amount of  Capital Gains  you  are deriving from the sale of the existing House                                 Property), no Capital Gains will be assessable, in view of Section 54..

                               Note: Section 54 does not require that the same funds as derived from the sale of the                                 existing House Property, must be utilized for the construction of the new house                                            property - Ishar Singh Chawla v CIT 130 TTJ (Mum.); the source of funds is quite                                           irrelevant.

              Option-2   Avail yourself of the benefit of Section 54EC - Invest 12L  in Capital Gains tax                                    Bonds, under Section 54EC and  use only  the balance amount  to                                      prepay the loan.

Thanks a lot for the clatification!

Sir i purchased a property in 2002 & sold it in march 2016 with capital gain of Rs 31 lakh. further i purchased another property in april 2016 in 67 lakh where Rs14 lacs of capital gain was utilised.

The rest amount Rs. 53 lakh was paid through housing loan. I have Rs. 17 lakh i my hand .kindly clearify the following

1. The availe the capital gain tax benefit whether i need to repay the housing loan 

2. keep the amout under capital gain / bond or

3. to keep the amount for own use.

Regards

Rajesh