LTCG Benefit on repaying Home Loan?

[Pahulpreet Kaur]

Hi everyone,

I have an existing property A which I can't sell for some reason but want to book another property B. So if I buy this property B on home loan now and sell my previous property A within 1 year and the amount I get from selling Property A I'll use it to pay Home Loan of Property B. In this case, Do I get Section 54 Benefit on LTCG of Property A?

 

[ShavirB]

@Tax with Ria @Hema Kulkarni

Requesting your expert insights

 

[Hema Kulkarni]

Yes, you will be eligible for benefits from Section 54 provided you meet the following conditions

1) Both Properties A & B should be residential properties
2) You should've owned Property A for minimum of 2 years
3) Both Properties A&B should be within India

If you do this activity after 1st April, 2024 the maximum exemption allowed will be capped at Rs. 10 crore. Before 1st April, 2024 there is no limit on the amount of capital gain exemption

 

[zacobite]

Hi everyone,

I have an existing property A which I can't sell for some reason but want to book another property B. So if I buy this property B on home loan now and sell my previous property A within 1 year and the amount I get from selling Property A I'll use it to pay Home Loan of Property B. In this case, Do I get Section 54 Benefit on LTCG of Property A?

Yes you can.. basis timing for ltcg /stcg and proof of reinvestment and amount..

 

[Pahulpreet Kaur]

@Hema Kulkarni & @zacobite Thanks for the confirmation. Just a small followup question, Property A should be sold within 1 year of purchase of Property B or within 1 year of possession of Property B.

 

[Hema Kulkarni]

As such Section 54 doesn't mention any documents required as a proof, but in my experience a registered sale deed can be considered as an adequate proof.

 

[zacobite]

As such Section 54 doesn't mention any documents required as a proof, but in my experience a registered sale deed can be considered as an adequate proof.

Will show in the IT portal also

 

[zacobite]

@Hema Kulkarni & @zacobite Thanks for the confirmation. Just a small followup question, Property A should be sold within 1 year of purchase of Property B or within 1 year of possession of Property B.

"
If the capital gain is more than Rs 2 Cr, in such a case, you must purchase another residential property within 1 year before or 2 years after you sell the property.
If the capital gain is less than Rs 2 Cr, in this case, you have the option of purchasing two residential houses or constructing two residential houses within 3 years.
There is a lock-in period of 3 years. That is, you can avail of an exemption if you have held the property for at least 3 years."

*From a reputable website*

 

[Pahulpreet Kaur]

Thanks guys

 

[Tax with Ria]

Hi everyone,

I have an existing property A which I can't sell for some reason but want to book another property B. So if I buy this property B on home loan now and sell my previous property A within 1 year and the amount I get from selling Property A I'll use it to pay Home Loan of Property B. In this case, Do I get Section 54 Benefit on LTCG of Property A?

Yes,you can completely get the benefit of CG in 54. Provided the maximum benefit is upto the capital gain earned or 10cr or amt invested in new plot whichever is lower.

 

[Mr Simplifier]

Hi everyone,

I have an existing property A which I can't sell for some reason but want to book another property B. So if I buy this property B on home loan now and sell my previous property A within 1 year and the amount I get from selling Property A I'll use it to pay Home Loan of Property B. In this case, Do I get Section 54 Benefit on LTCG of Property A?

If you sell a property (other than agricultural land) and buy another one within a specified time frame, you can claim exemptions under Section 54 and Section 54F of the Income Tax Act, 1961, to save on capital gains tax. Here's a brief overview of these sections:

1. Section 54: This section allows individuals to claim exemption on capital gains tax if they sell a residential property (not a plot of land) and reinvest the proceeds in another residential property within specific time frames. As of my last update, the time frame for investing in a new property is either one year before the sale or within two years after the sale, or within three years to construct a new property. The exemption is limited to the amount of capital gains or the cost of the new property, whichever is lower.

2. Section 54F: This section provides exemptions on capital gains tax arising from the sale of any asset other than a residential house (e.g., land, commercial property) if the sale proceeds are reinvested in purchasing a residential property within the specified time frames. The conditions and time frames for reinvestment are similar to Section 54.

It's essential to meet all the conditions specified under these sections to claim the exemptions. Additionally, if the entire capital gains amount is not reinvested, the remaining portion will be taxable as capital gains in the year of sale.

Please note that tax laws and regulations may change over time, so it's advisable to consult a tax professional or chartered accountant for the most up-to-date and personalized advice.

 

[Pahulpreet Kaur]

Thanks guys for the clarification