Ajit George (Retired) 10 December 2018

Capital gains on sale of a plot of land

Sirs, I have a plot of residential land in a gated community. I would like to sell the plot. As the plot was purchased over 15 years back, the value has appreciated. There would be capital gains on the plot after indexation. What avenues are open to me to avoid paying capital gains tax APART FROM investing in notified bonds of REC, NHAI etc? If I buy another plot would I be eligible to claim exemption from Capital Gains? Thanks, Regards, Ajit

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Rama chary Rachakonda (Secunderabad/Telangana state Highcourt practice watsapp no.9989324294 ) 10 December 2018

Exemptions from your Gains that Save Tax
Section 54F (applicable in case its a long term capital asset)

If you are using your entire sale proceeds to buy a house property you may end up paying no tax on your gains when – You satisfy all these conditions

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(a) You purchase ONE house within 1 yr before the date of transfer or 2 yrs after or construct ONE house within 3 yrs after the date of transfer.

(b) You do not sell this house within 3 yrs of purchase or construction

(d) You should not own more than 1 residential house (other than the new one) on the date of transfer

(e) You do not purchase within a period of 2 yrs after such date or construct within a period of 3 years after such date any residential house (other than the new one).

When you satisfy these conditions and invest entire sale proceeds towards the new house – you won’t pay any tax on your gains. However, if you invest a portion of the sale proceeds, the exemption will be the proportion of the invested amount to the sale price or exemption = cost of new house x capital gains/net consideration.