I’ve two small residential flats. One was purchased in 2001 and we lived in that till 2017, then moved to a smaller flat purchased in 2016 by taking housing mortgage. Now we wish to purchase an even bigger home for self-usage and thus planning to promote our previous 2001 flat in March 2022. The tentative Lengthy Time period Capital Positive factors (LTCG) on our previous flat is about 65 Lakh (after indexation) and new flat will value us 160 Lakh. Please inform me whether or not I can take benefit of this capital acquire to purchase new home for private utilization? Please notice I already personal one flat on the date of sale of the previous flat. I’m a pensioner.
Since you’ve gotten bought the previous flat after holding for greater than 24 months the earnings arising on sale of this flat are taxable as long run capital acquire. The tax legal guidelines have provisions for permitting exemption from tax on long run capital good points if funding is made sure specified belongings. As per Part 54 of the Revenue Tax Act, an Particular person and an HUF can declare exemption from long run capital good points arising on sale of a residential home by investing the listed capital good points for getting one other residential home inside specified interval. The exemption is accessible if the funding is made inside two years for getting a home. In case of self-construction of a home or reserving of an beneath development home an extended interval of three years is accessible. The long run capital good points which aren’t so invested by the due date of submitting of the Revenue Tax Return (ITR), the unutilised quantity is required to be deposited in an account beneath capital good points account scheme and which can be utilized for making fee for buying the residential home throughout the specified time interval. In case the quantity will not be utilised inside prescribed interval, the identical turns into taxable within the 12 months during which the interval so expired.
There are not any restrictions on the variety of residential homes you’ll be able to personal on the date of sale of the property to be eligible for claiming exemption beneath Part 54.
Since you’re planning to take a position greater than the listed long run capital good points, you’ll not have any tax legal responsibility. Nonetheless in case full long run capital good points usually are not invested, the exemption will probably be obtainable to the extent of funding and on the steadiness you’ll have to pay tax at flat fee of 20%.
So in case you promote your flat by thirty first March 2022, you’ll have to purchase the brand new flat by thirty first July, 2022 which is your due date for submitting of your ITR. In case you aren’t in a position to take action you’ll have to deposit the unutilised cash within the capital good points account. If doable, I’d advise you to execute the settlement within the subsequent 12 months in order that you should have longer interval until thirty first July 2023 obtainable to you for investing the LTCG.
Balwant Jain is a tax and funding knowledgeable and could be reached on jainbalwant@gmail.com and @jainbalwant on Twitter.
Supply: Live Mint