Exemption from LTCG by repaying home loan

- Exemption would be available but it may be subject to litigation. You are required to utilize only capital gain amount to avail exemption

- Ensure TDS deduction on each installment on purchase of under-construction property

- Alternatively you can sell the property currently and utilize the proceeds for construction of the new property. It will save you from availing loan and if you decide to reside in the rented property then you can claim exemption against HRA. Construction should be completed within 3 years from the date of sale of the property and you have to open capital gain account scheme if total LTCG is not utilized before the filing of ITR of the year in which property is sold

For detailed discussion you may opt for phone consultation

Litigation means scrutiny by the Income tax department and may disallow the benefit of exemption

Current Plan:

• You plan to sell your current property and use the proceeds to repay the home loan on your new property.
• The sale of your current property will generate LTCG, and you intend to use this amount to repay the home loan.
• Tax Implications:
• 
  Exemption under Section 54:

  • To claim the exemption, the LTCG should be utilized in purchasing or constructing another residential property.
  • Repaying a home loan is not explicitly covered under Section 54 for claiming the exemption.
  • Thus, using the sale proceeds to repay the home loan may not qualify for exemption under Section 54 and could be subject to litigation or scrutiny by the Income Tax Department.

• 
  Alternative Approaches:

  • 
    Capital Gains Account Scheme:

    • If you sell your current property and do not immediately reinvest the LTCG, you can deposit the amount in the CGAS to claim the exemption. The funds can later be used for construction or purchase as per the timelines mentioned.

  • 
    Purchase/Construction within Timeline:

    • Ensure that the LTCG is used within the stipulated time frame for purchasing or constructing the new property to avail of the exemption.

For detailed, personalized advice, consider a phone consultancy.

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Shubham Goyal

It depends when you purchase the property. Property is considered as purchased when it is registered in your name and you have the possession. So if you get possession in 2026 and sell the old property in 2026 then you can claim exemption against sale of old property.

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