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Please Help: Income-tax

Posted Date : 21-Apr-2022 , 05:04:49 pm | Posted By: S KALYANARAMAN

Category : Income Tax | Answers : 0| Comments : 3| Hits: 3560

Sirs I propose to demolish the existing building and construct a flat G+3. I want to sell one flat and the entire proceeds will be utilized for construction of the remaining flats which are going to be for my use. Kindly advise us whether any of the above transactions will attract capital gains tax and if so how to plan the transactions, so that the provisions of capital gains are not attracted. Thank you S.Kalyanaraman

Posted By : AR Krishnan Associates 19-Jul-2022, 12:57:47
As per I-T Act, if the entire Sale Consideration in re-invested in a purchase or construction of residential house/flat, the Assessee can claim exemption from Capital Gain Tax. The law allows the Assessee to re-invest the proceeds from Sale in two residential units. Hence, if you sell one flat and utilize the entire proceeds in construction of two other flats you can claim exemption from Capital Gains on the flat you sold. Note you can claim exemption only for upto the cost of construction of only two flats. If the cost of construction of those two flats is less than the Sale Consideration of the flat you had sold, then you can claim exemption only for the proportionate amount of Capital Gains. Also note, if you are entering into a Joint Venture for promotion of your land the actual terms of the MoU will determine the nature of transaction and would impact your tax liability under I-T Act
Posted By : ATIT D. SHAH 14-Jun-2022, 09:53:33
Yes there will be capital gains on sale of 1 flat. There are few case laws that allows benefit of section 54 on constructed property.
Posted By : Sunilkumar Sannidhi 14-Jun-2022, 07:24:29
In order to suggest the planning, you need to provide information more precisely regarding a) Type of property you are demolishing(Residential/Commercial) b) Year of purchase of such land c) Year of construction of building(If not purchased along with the land)

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