LTCG on sale of old house.

[Reddy S.R.]

Dear sir,

I have sold my 5 years old house on 19/11/2009 and booked LTCG of Rs35 Lacs.To avail Cap.gains tax exemption,I booked a flat for Rs 30 Lacs.To avail full exemption,can I buy Cap.Gains Bonds for the balance of Rs 5 Lacs at the end of 3 years period allowed for construction? Please clarify.Thanks.

Reddy S.R.

[malhar shenoy]

To avail the exemption from Capital Gain , the house to be purchased within 3 years subject to condition stipulated under section 54. in the above referrred case the balance of Rs 5 lac not utilised for the purchase will be taxable as LTCG.

To avoid the tax the amount can be deposited in Capital Gain Sheme a/c in the bank , for the purpose of utilising the same for contruction only . so the bond specified u/s 54EC  has to be purchased within 6 month from date of transfer. and in no case beyond that date or end of three year.

[Reddy S.R.]

Dear Malharji,

Thank you very much for your prompt reply to my query.

Reddy S.R.

AI Summary

Capital gains exemption timing: invest sale proceeds in bonds or a capital gains account within statutory windows to preserve exemption.
Long term capital gain exemption on sale of a house requires reinvestment of sale proceeds within prescribed mechanisms. Unutilised proceeds after purchasing a new property are taxable unless deposited in the Capital Gains Account Scheme for construction or invested in specified capital gain bonds within the statutory purchase window; failure to meet those timing and utilisation conditions causes the unutilised amount to be treated as taxable long term capital gain.