Hello sir..the underconstruction flat registration has been done in Nov 24 but the possession is expected in Dec 2027.the commercial property that I have sold in June 2025 was purchased in 2003.so I want to know the adjustment of capital gain.i don't have any loan .the 50% payment has been paid to builder already.

Ans: Hi
You may have a long term capital gain of about Rs. 6.70 Lakhs. Suggestions to avoid paying any tax on this gain would be to pay towards the construction of the new house. This would mean that you may need to sell your house before you take possession of the new house in December 2023 and use the sale consideration to pay to the builder to the extent of approx Rs. 6.70 Lakhs to make it eligible as reinvestment in a new under construction property. This cannot be the other way round i.e. you cannot pay full amount to the builder and take possession and thereafter sell the old house.

If you need the house to stay till the possession of the new property then you could try for a rental arrangement with the buyer of your old house.

Ans: Hi
The approximate Long Term Capital Gain would be about Rs. 22.45 Lakh. Subject to all conditions of carry forward of losses being met, the loss of Rs. 23 Lakh brought forward could be set off against the long term capital gain

Ans: 1. Calculation of Long-Term Capital Gains
Step 1: Determine the Sale Price
Sale Price: Rs 85 lakhs (amount for which the property was sold)
Step 2: Determine the Cost of Acquisition
Initial Purchase Price: Rs 27 lakhs (as per registered document)
Step 3: Adjust for Inflation
To calculate LTCG, the cost of acquisition is adjusted for inflation. This adjustment is done using the Cost Inflation Index (CII) provided by the Income Tax Department.

CII for the Year of Purchase (2010): Refer to the index published by the government for the year 2010.
CII for the Year of Sale (2023): Refer to the index for 2023.
Step 4: Calculate Indexed Cost of Acquisition
Use the formula:


Step 5: Calculate the Long-Term Capital Gains
LTCG
=
Sale Price
−
Indexed Cost of Acquisition
LTCG=Sale Price−Indexed Cost of Acquisition

2. Tax Implications
As it is sold before July 2024, the long-term capital gains are taxed at 20% with indexation benefits. Additional tax benefits may apply depending on the investment options you choose.

3. Saving on Long-Term Capital Gains Tax
Investment in Residential Property
If you reinvest the gains into another residential property, you can claim an exemption under Section 54 of the Income Tax Act.

Conditions: The new property must be purchased within two years of selling the old property or constructed within three years. The exemption is applicable on the amount of capital gains reinvested.
Investment in Capital Gains Bonds
You can invest up to Rs 50 lakhs of capital gains in specified bonds under Section 54EC to claim an exemption. These bonds must be held for a minimum period of five years.

Eligible Bonds: The bonds are issued by the National Highway Authority of India (NHAI) or Rural Electrification Corporation (REC).
Investment in Rural Development Bonds
Under Section 54EC, you can also invest in rural development bonds. These bonds also have a lock-in period of five years.

Reinvestment in Residential Property
To fully utilize the exemption, reinvest the entire long-term capital gains amount into a new residential property. Ensure compliance with the time limits mentioned.

4. Final Insights
Here’s a summary of actions you can take:

Calculate Indexed Cost: Use the CII to adjust the cost of acquisition for inflation.
Calculate LTCG: Determine the gain by subtracting the indexed cost from the sale price.
Explore Exemptions: Consider reinvesting the gains in a new residential property or capital gains bonds to reduce or eliminate tax liability.
Implement these strategies to manage your tax liability effectively. Always ensure you comply with the conditions specified under the Income Tax Act for exemptions.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: You invested Rs.?65?lakh in an under-construction flat (purchased Nov 2024, possession in Dec 2027). You’ve paid 50% and executed the sale deed. You sold a commercial property in June 2025 for Rs.?1.15?crore. You wish to know if gains from that sale can be used tax-efficiently by applying them toward your current flat purchase. Let’s explore carefully from all angles.

? What Is Your Capital Gain Status?

– You sold the commercial property in June 2025.
– That counts as a long-term capital asset.
– Indexation benefit applies if held for over 24 months.
– If bought more than 2 years earlier, it’s a long-term gain.

You can compute your taxable gain using indexed cost. This will reduce your tax liability significantly.

? Key Tax Rule: Exemption Using Reinvestment

– Section 54F allows exemption if you reinvest sale proceeds into a residential property.
– The new property must be purchased or under construction.
– You must invest within specified periods.

The flat you purchased in Nov 2024 is under-construction, so it may qualify. But detail matters.

? Conditions Under Section 54F

– You must invest the net sale proceeds fully into a residential property.
– You bought the new flat before or within 2 years of sale.
– You must complete construction within 3 years of sale.
– Unsurpassed funds become taxable.
– You must not hold more than one residential property at sale time.

Check off each:

You haven’t completed construction yet.

Purchase occurred before sale or within 2 years.

You must complete by June 2028 (i.e., within 3 years).

So far, you meet timelines.

? How Much Can You Exempt?

– Exemption is proportional to amount reinvested vs proceeds.
– If full proceeds are used, full gain is exempt.
– If only part is used, exemption is partial.

Your sale fetched Rs.?1.15?crore. You invested Rs.?65?lakh so far.
Thus Rs.?50?lakh remains to be invested by Dec 2027 or by sale of new flat (within 3 years).
Exemption equal to Rs.?65?lakh / Rs.?1.15?crore portion.
Balance gain above that proportion becomes taxable.

? Timeline You Should Meet

Sale date: June 2025 → 3-year window ends June 2028.
So you must complete construction and register possession transaction by June 2028.

Ensure builder’s possession date of Dec 2027 gives enough latitude.

? Using Capital Gain Account Scheme

– If you can’t invest full proceeds before filing ITR, you can deposit balance in Capital Gain Account Scheme.
– That deposited amount must be used within allowed period.
– Until used, exemption holds.

This helps meet exemption while ensuring proper use.

? What If You Don’t Reinvest Full Amount?

– Only the reinvested portion is exempt.
– Unused capital gain becomes taxable in that financial year.
– Therefore, plan whether to invest balance of Rs.?50?lakh.

? Long-Term Gain Tax Calculation Example

– Assume indexed profit was Rs.?40?lakh.
– If you reinvest Rs.?65?lakh fully, entire gain is exempt.
– If you reinvest Rs.?35?lakh only, exemption proportion = 35/115.
– Rest becomes taxable.

So invest wisely. Full exemption depends on complete reinvestment.

? Your Action Steps

– Ensure that new flat purchase is registered before June 2027.
– Keep track of total payments made before due date.
– After purchase, invest balance sale proceeds into Capital Gain Account Scheme if needed.
– Use deposit and payments toward construction by June 2028.
– At ITR filing, submit proof of purchase, payments, and bank statement of deposit.

Your tax officer will check these.

? Multiple Property or Joint Ownership?

– You should not hold any other new property at sale time.
– Joint ownership of original home is allowed.

If you already own another residential property before sale, then Section 54F exemption won’t apply.

? If Construction Gets Delayed

– If builder delays possession beyond Dec 2027, your exemption eligibility still holds as long as possession is before June 2028.
– If builder delays further beyond June 2028, your exemption may be in jeopardy.
– In that case, un-invested capital gain becomes taxable.

So keep proof of builder timeline and extension documents.

? What Happens on Flat Possession?

– After possession and registration, your flat becomes the asset for exemption.
– Any remaining funds deposited in CGAS must be withdrawn/used within allowed time.
– Copies of registration and builder receipts are needed at ITR time.

? If You Repay Loan Instead?

– You can use sale proceeds to pay loan on flat.
– This counts as investment in property.
– Accounts for Section 54F exemption.

This helps utilize funds fully while getting exemption.

? Importance of Record Keeping

– Retain sale deed and purchase deed.
– Keep all builder payment receipts.
– Maintain CGAS deposit challans.
– Builders estimates on completion timelines.
– These help support exemption claims.

Poor documentation may invite inquiries.

? Alternative: Invest into Capital Gain Bonds?

– Under Section 54EC, you can invest in specified bonds within 6 months of sale.
– But the lock-in is 5 years.
– And you can invest only up to Rs. 50 lakh in one financial year.
– These bonds offer exemption on gain only partially.

If you need liquidity soon, CGAS route is better.

? Consider Portfolio Re-balancing

– You already invested Rs.?65 lakh in real estate.
– That is now an illiquid asset.
– Remaining sale proceeds should fund new flat (an asset for same purpose).
– Do not extend to investment property.
– Keep any extra funds in mutual funds for future goals.

That builds long-term wealth and liquidity.

? Mutual Funds vs Real Asset Balance

– Real estate helps save tax via Section 54F.
– But real estate is not a productive investment.
– Mutual fund SIPs offer better return, liquidity, and diversification.
– Once you complete flat investment, any residual amount should go into actively managed equity funds.
– This avoids over-exposure to property and boosts net worth.

? Role of a Certified Financial Planner

– CFP can draft your tax filing plan.
– They ensure exemption is claimed properly.
– They optimise reinvestment and use of CGAS.
– They also crafting your post-leverage portfolio structure.
– They guide review of mutual funds for future goals.

Your situation merits full CFP involvement.

? Timing: When to File ITR?

– Sale happened in FY?2024–25; file ITR after March 2026.
– If you complete flat purchase by Dec 2027, report in ITR FY?2027–28.
– Or deposit in CGAS before due of ITR FY?2024–25 to claim in that year.

Work with your taxation team to align documentation.

? Final Insights

– You qualify for Section 54F exemption for your under-construction flat.
– Exemption is proportional to reinvestment amount in flat.
– Invest full Rs.?1.15?crore sale proceeds to fully exempt tax.
– If you fall short, can use CGAS till June 2028.
– Maintain records of payment and possession.
– Avoid holding another residential property.
– Post-construction, SEBI the residual should be parked in equity.
– MF investments give better growth and liquidity.

Your current plan is workable. Just follow timelines and documentation to secure your exemption.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment