Can Long term capital gains from shares be invested in Housing construction to avoid LTCG tax at 10%. or How to avoid LTCG Tax from the sale proceeds of shares.

Ans: Yes, Long-term capital gains (LTCG) arising from the sale of equity shares can be saved by investing in residential house property, subject to certain conditions.

Section 54 of the Income Tax Act provides for exemption of capital gains arising from the sale of a residential property, subject to certain conditions. However, from the Finance Act, 2019, the exemption has been extended to include long-term capital gains (LTCG) arising from the sale of equity shares as well.

As per the provisions of section 54 of the Income Tax Act, an individual can claim exemption from LTCG tax by investing the amount of capital gains in the purchase or construction of a residential house property. However, the exemption is subject to certain conditions:

The new residential property should be purchased or constructed within two years from the date of transfer of the original asset.

The property purchased or constructed should be situated in India.

The exemption is available only for one residential property.

If the new residential property is sold within three years of purchase or construction, the LTCG exemption claimed earlier will be revoked, and the gains will be added to the individual's income in the year of sale.

It is advisable to consult a tax expert or a chartered accountant to ensure that you meet all the necessary conditions and to calculate the exact amount of exemption available.

Ans: Person who has earned long term capital gain from shares/MF can invest sale consideration in house property provided he/she does not hold more than one house property.