REINVESTING PROCEEDS OF CAPITAL GAINS

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Dear Forum Members

I had sold a property in June 2013 and out of the Capital Gains arising out of the sale of the property, I have invested in land and building. As per the Income Tax Act I had to invest ₹ 46 Lakhs either towards an apartment by June 2015 or buy a land and construct a house by June 2016 to avoid paying Capital Gains Tax

I bought a vacant land in September 2015 for ₹ 90 Lakhs (much more than the Capital Gains that I needed to invest as this is the only land I could afford in the fringes of the city) and commenced construction in November 2015. On completing the foundation and plinth I ran out of funds and I could not complete the construction. As per the Income Tax act I need to have completed the house construction by June 2016. But there is no way I can complete the construction by June 2016 as I do not have the necessary funds to complete the construction

I have an Electricity Connection and a certificate from the contractor for completing the foundation and plinth. Is this good enough for Income Tax or would I have to pay Capital Gains tax as I have not completed a house or a dwelling unit

Suggestions from experts will be appreciated

Regards

Srinivasan Krishnan

Chennai

AI Summary

Property Seller Seeks Tax Exemption: Is Electricity Connection and Contractor's Certificate Enough to Avoid Capital Gains Tax? An individual sold a property in June 2013 and invested the capital gains in land and building to avoid capital gains tax, as required by the Income Tax Act. They purchased land in September 2015 and began construction in November 2015 but could not complete it by the June 2016 deadline due to financial constraints. They seek advice on whether having an electricity connection and a contractor's certificate for the foundation and plinth is sufficient to avoid capital gains tax. A respondent advises that construction must be completed to claim the exemption. The individual also inquires about reinvesting proceeds from another property sale in a residential house to claim benefits.