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New Property Purchase Before Selling Old: Tax Implications for Ramesh?

Milind Vadjikar | Answer |Ask -Follow

Insurance, Stocks, MF, PF Expert - Answered on Sep 07, 2024

Milind Vadjikar is an independent MF distributor registered with Association of Mutual Funds in India (AMFI) and a retirement financial planning advisor registered with Pension Fund Regulatory and Development Authority (PFRDA).
He has a mechanical engineering degree from Government Engineering College, Sambhajinagar, and an MBA in international business from the Symbiosis Institute of Business Management, Pune.
With over 16 years of experience in stock investments, and over six year experience in investment guidance and support, he believes that balanced asset allocation and goal-focused disciplined investing is the key to achieving investor goals.... more

Question by Ramesh on Feb 06, 2024Hindi

Hi Sir, I am buying and making full payment for a New Residential Property in Feb 2024 Costing Rs.1.5 Cr. Also, I will be selling one of my old properties for Rs.1.1 Cr. in March or April 2024. This was purchased in 2009 for Rs.36 Lakhs, Capital gains is of Rs.38 Lakhs after indexation. PS. I own 4 Residential Properties as on date. My query is, if I make the payments for my new property from my Savings, prior to selling and receiving the payment of my old property, what is the Tax implications for the Capital gains. Secondly, I have also sold my Mutual Fund with long term capital gains of 12 Lakhs, can I claim tax exemption if I invest in the new Property. Looking forward to your valuable advise. Thanks Ramesh

Ans: You will have to pay LTCG on old property sale @ 20% with indexation which would ~7.6L

Sec 54F benefits are applicable for second property. Since you already have 4 properties in your name I believe you won't be eligible to claim benefit from LTCG accruing out of MF sale transferred to acquire RE property, however suggest you seek alternate opinion from CA.

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Mihir Tanna | Answer |Ask -Follow

Tax Expert - Answered on Sep 29, 2022

Question by Rabin - Sep 29, 2022Hindi

Dear Mr Mihir, I would like to know the following points: I bought a flat in Thane - 400603 @ rs.one lakh in Dec.'1983 & would like to sell now this year 2022 @ rs.64 lakhs. Pl. let me know the amount of Property Gain Tax (Long Term) which I have to pay now considering 'Ready Reckoner Rate' at Thane - 400603 area or how to calculate the same to get taxable amount? Also can I (as Sr. Ctzn.) get a tax exemption as I already bought (in joint ownership where my wife is 1st owner) another flat @ rs.75 lakh in Thane in Nov '2020? May I invest taxable amount (if any) in Govt. Bonds like NHAI / REC / PFC to get tax exemption & what interest I will get for how many yrs. or else if it will be better to invest my selling amount in good Flexi Cap Mutual Funds for 5 years after paying entire taxable amount to recover the same? Will appreciate your prompt feedback in detail.

Ans: Capital gain on sale consideration will be reduced by Indexed cost of acquisition and allowable expenses incurred on transfer. You have to calculate indexed cost of acquisition by applying Cost Inflation Index as per prescribed formula on cost of acquisition.

For cost of acquisition, you may take actual cost or fair market value of the asset, as on 01.04.2001.

In case of land and building, fair market value on 01.04.2001 cannot exceed stamp duty value as on 01.04.2001.

Exemption is available if amount of capital gain is invested by purchasing a new residential house within one year before or within 2 years after the date of transfer of the residential house.

As you have already got possession of new property in November 2020, you will not be eligible for exemption.

Decision of investment in specified bonds or acquiring tax mutual funds can be taken after considering several factors like risk appetite, amount of tax liability on capital gain, availability of surplus fund etc.

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