Sir, On 14-June 1994, I acquired a flat (tenement) in my own name for Rs. 2,98L. In April 2015, I had to spend Rs. 4.15L on general renovation of this flat. Now, I plan to sell this tenement and wish to invest its sale proceeds within two years of the sale in buying a ready possession flat in another city. My queries are follows: 1. Can I invest the sale proceeds in buying two flats in the same society of the new city or do I have to necessarily invest in one property only? 2. Can I add the name of my spouse and my son also as co-owners in the new property(s) even if their financial contribution is nil? 3. Can I add the name of my spouse and my son also as co-owners in the new property(s) in case they also partially contribute financially in the purchase of the new flat(s)? 4. What is the present applicable Indexed Cost of the flat planned to be sold by me?

Ans: Hello,

I understand your situation and I'm here to help. Based on the details you've provided and the current tax laws in India, here's what you need to know:

1) The amount you've spent on acquiring the housing plot can indeed be considered for the utilization of your capital gain. As per the Income Tax Act, if you reinvest the capital gains from the sale of a property in buying a new property or constructing a new house, you can claim tax exemption on the capital gains.

2) The amount you need to keep in the Capital Gain Account Scheme (CGAS) would be the remaining amount after deducting the cost of the plot from the capital gain. In your case, if you've already spent Rs. 11.00 Lakh on the plot, you would need to keep Rs. 4.00 Lakh (Rs. 15.00 Lakh - Rs. 11.00 Lakh) in the CGAS. This amount should be utilized for the construction of the house within the specified time period, which is 3 years from the date of sale of the original property.

Ans: I propose that you estimate the long term(assumed) capital gain tax liability that may arise after sale of this flat considering indexation or without indexation as is optimal for you. Next consider the future redevelopment potential in the tier-1 city particularly in the area where you have the flat. Another point to be borne in mind is if your daughters need to move to tier-1 city in future for better coaching, education, prospects then this aspect needs to be considered. If you still want to sell the flat then time it in such a way when you want to buy new residential property in tier2 city because you can utilise all your gains here without paying any capital gain tax(Section 54 of Income tax act allows exemption subject to conditions) and/or buying section 54 EC Capital Gain bonds to save LTCG payment(50L per FY limit & 6 months within sale of property subject to eligibility).

Unless you have strong knowledge of markets or an investment advisor to assist you, I would recommend you to redeem your(family) stock holdings(subject to high volatility and needs regular monitoring) of 85L+15L and invest it in a staggered manner into equity savings and value focussed balanced advantage fund for horizon of 4-5 years.

*Investments in mutual funds are subject to market risks. Please read all scheme related documents carefully before investing

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Happy Investing!!

Ans: Hi Karunakar,

You have an House property (independent house) valued at 1.6Cr which you intend to sell and use the amount to purchase another House property (flat) with value of 1.4Cr.
You have raise multiple queries and before responding to them, I will try to explain the capital gains on house property.
Capital Gains = Sale value - cost of acquisition - cost of improvement - expenses incurred for sale (e.g. brokerage).
So first calculate the Capital gains on selling the property, as you mentioned you are selling it for 1.6Cr, so reduce it by the acquisition cost, etc.
Once you have the Capital gains amount, that is the amount you need to re-invest in another property to save tax on it, in your case the Flat (value more than the CG) can be purchase within the next 2 years and no tax will be payable.
So lets assume out of 1.6 Cr, you have CG of 1Cr, then 1Cr reinvested in another property i.e. for your flat cost of 1.4Cr, you will have no tax payable.
So its not the full value of sale, its only on the Capital gains that you need to worry for paying taxes.
The remaining amount of 60lakhs in above example can be utilized as per your requirement.
Responses
1. & 2. You can use any amount above the capital gains for any purpose you see fit - like parking, registration, loan or any other form of investment.
3. If the sale will conclude in April 2025, and your payment of the capital gains towards new flat will be April 2026, then you need to invest the capital gains amount as per below -
- if you are sure of purchase of flat, then within 6 months of sale date invest the amount in "Capital Gains Account Scheme CGAS)" in authorized banks. Amount will be kept in a special FD for 2 years and you can withdraw anytime to pay for your new property.

Within 6 months from sale of property or before tax filing for FY of sale date, i.e. FY25-26 filing date 31 July 2026, whichever is earlier, you need to make a decision.
If you are not planning to purchase another house property, then reinvest in specific long term capital gain bonds from NHAI, REC, some others, these bonds have lock-in of 5 years
If you decide to purchase another property, deposit CG in CGAS as mentioned above.

Interest earned on these deposits in taxable (under head of Other income).

Thanks & Regards
Janak Patel
Certified Financial Planner.

Ans: Yes, you can invest the total Rs 60 lakh in a single residential flat to claim capital gains exemption under Section 54 of the Income Tax Act. However, there are a few conditions you must follow:

Key Conditions for Claiming Exemption
The new property must be a residential house. It should not be commercial or under construction beyond the allowed timeline.

The investment should be within the allowed time frame. You must buy the new flat within 2 years from the date of sale or construct it within 3 years.

You can use the amount from multiple sales. Even if you sell different floors of your property to different buyers, you can reinvest the total capital gain in one residential flat.

The capital gains account balance should be used within the allowed period. You must invest the Rs 30 lakh in the new house before February 2026. Otherwise, it will become taxable.

Important Considerations
If the new property costs less than Rs 60 lakh, the unused capital gain will be taxed.

The exemption applies only to long-term capital gains. If any portion of your gain is short-term, it will not qualify for exemption.

You must not sell the new property for at least 3 years. If you sell it before 3 years, the exemption will be reversed, and you must pay tax on the gains.

Final Insights
Yes, you can invest Rs 60 lakh in one flat and claim exemption under Section 54.

Ensure that you buy the new property within 2 years or construct it within 3 years.

Keep proper documentation for all transactions to avoid issues with the tax department.

If you need more clarity, consult a tax expert before making the final investment.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment