Sale of plot for construction of house

 if a property is sold within three years of buying it, it is treated as a short-term capital gain. This is added to the total income and taxed according to the slab rate.

However, if you sell a property after three years from the date of purchase, the profit is treated as a long-term capital gain and is taxed at 20% after indexation. While you can avail of various tax exemptions in case of long-term capital gains, no such benefit is provided for short-term ones.

One of the advantages associated with long-term capital gains is the inclusion of indexation while determining the profit. Indexation is a method through which the seller is able to inflate the value of his assets. Since inflation reduces the value of an asset over time, it is essential to increase the initial cost of the house to calculate its current value. 

Dear Mr. Chary,

Thanks for your reply.

But what I want to know is that I have invested the money in construction of house within three years of sale of plot and did not open Capital Account in the Bank for the purpose as required under the I/Tax rules.

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