Hi, I recently sold a property that I bought in 2016 with 10 Lakh of capital gain. I'm also constructing a house, reason for which I sold the property. However, the property that I'm constructing a house at is in the name of my mother. My mother and I are jointly going for partial housing loan for the purpose of construction. I understand that I need to pay around 2 Lakhs in Tax on LTCG on my property. My question is, can I somehow save this tax (full or partial) as I'm constructing a house and taking loan ? OR can I postpone paying LTCG tax next year or so as I need money for construction. Thanks, Ravi
Hi Ravi
Please specify when this land was purchased by your mother. If this land was purchased before 1 year from the date of sale of your property, option could be that you buy this land from your mother first. This could also be purchase of part of land. Doing that, you can claim exemption from capital gains by way of investment in this land and construction thereon.
Did you sell the property before 1st april or after 1st april?
If it was sold before 1 april tax needs to be paid till 30.11.2020 i.e. at the time of filing your return of income with interest @1% per month.
If it was sold after 1 april you can pay tax till 31.07.2021.
Constructing this property won't help you really as the property would be in your mothers name.
However if you wish to litigate you can say that you have invested the amount and hence no capital gain is to be paid by you.
Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.
Thank you.
My mother bought this property in the year 2004. I don't think buying property from my mother is an option (not sure) as the registration cost (stamp duty for sale deed) in my area in bangalore is quite high ( around 2.5 lakhs ). Thanks, Ravi
In that case, exemption shall not be available for reinvestment.
Another option could be exemption under section 54 EC. Investment of capital gain amount I.e. 10 lacs could be made in eligible bonds. Such bonds shall be redeemable after 5 years.
Please note that investment in such bonds shall have to be made within 6 months of sale of property.
Paying 2.5 lakh stamp duty to save 2 lakh tax is not a wise option i guess.
Dear Sir,
Hope you are doing well !!
You can invest the capital gains of Rs 10 lakhs in bonds of NHAI or REC, within six months of its accrual and get the exemption u/s 54EC.
Such bonds shall be redeemable after 5 years. Only interest received on such bonds shall be taxable. There would be no taxes on redemption after 5 years.
Yes, it is not a wise option.
Dear sir
in ur case it is not advisable to buy property from ur mother as u need to pay stamp duty of Rs 2 lakhs
plus u can save tax by investing in bond that is mentioned under sec 54EC. It is eligible for 5 years after that interest will bi applicable.
Hello,
In my opinion, you would be eligible for an exemption for the amount spent on the construction of the house even though the plot is held in your mother's name. Provided that you complete the construction within a period of 2 years from the date of transfer of long term capital asset.
I hope this answer satisfies your requirements.
Regards,
CA Hunny Badlani
Buying the property from your mother shouldn't be done.