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1.85cr plot sold, 1.4cr new plot bought - save or invest remaining?

Ramalingam Kalirajan |9569 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Feb 19, 2025

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Feb 18, 2025Hindi

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I have sold a plot worth for 1.85 cr... I have bought a plot worth 1.4 cr... can i keep the remaining in my saving account for house construction or do i put the balance amount in a cgas account

Ans: Since you sold a plot for Rs 1.85 crore and purchased another plot for Rs 1.4 crore, you have a balance of Rs 45 lakh.

Capital Gains Tax Implication
Long-Term Capital Gains (LTCG): If the plot you sold was held for more than 2 years, the profit is considered long-term capital gains (LTCG) and is subject to tax.
Tax Rate: LTCG on real estate is taxed at 20% with indexation benefit.
Reinvestment for Tax Saving: You can save tax by reinvesting the gains in a residential property under Section 54F of the Income Tax Act.
Can You Keep Rs 45 Lakh in a Savings Account?
No, if you intend to claim tax exemption under Section 54F, you cannot keep the balance amount in a savings account beyond the due date for filing your Income Tax Return (ITR).
If you don't invest in a residential house before filing your ITR, you must deposit the unutilized amount in a Capital Gains Account Scheme (CGAS).
You must use the CGAS amount within 3 years for house construction.
What Should You Do?
If You Are Constructing a House
Deposit Rs 45 lakh in a CGAS account before the due date of filing your ITR.
Use this amount within 3 years for house construction to claim full tax exemption under Section 54F.
If You Are Not Constructing a House
The Rs 45 lakh will be taxed as LTCG, and you must pay 20% tax (after indexation benefits).
Consider other tax-saving options, like investing in bonds under Section 54EC (with a 5-year lock-in).
Final Insights
If you plan to construct a house, deposit the Rs 45 lakh in a CGAS account before filing ITR.
If you don’t use this amount within 3 years, it will be taxed as LTCG in the year of expiry.
If you don’t want to construct a house, be ready to pay LTCG tax or invest in 54EC bonds for tax saving.

Best Regards,

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

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.

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Mihir Tanna |1066 Answers |Ask -Follow

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Question by Vijay - Jul 21, 2023Hindi

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Dear Mihir I have sold a residential property in Feb.2023 and have capital gain of about 15.00 lakh. To construct new house, I have already bought residential plot costing 9.00 lakh and sale deed registered in May,2023. The cost of Plot was meet out from the sale proceed of the residential property sold in Feb.23. Kindly advise whether I have to kept Rs.6.00 lakh (i.e.Gain15.00 lakh minus 9.00 lakh cost of Plot) in Capital Gain Account Scheme for the construction of House OR I have to kept whole money of Capital Gain i.e. Rs.15.00 lakh in the CGAS. How much Amount I have to show in the IT Return for AY 2023-2024.

Ans: Unutilised amount of gain is required to be deposited in Capital Gain Account scheme

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Asked by Anonymous - Jul 21, 2023Hindi

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Dear Chokshi JI I have sold a residential property in Feb.2023 and have capital gain of about 15.00 lakh. To construct new house, I have already bought residential plot costing 9.00 lakh and sale deed registered in May,2023. The cost of Plot was meet out from the sale proceed of the residential property sold in Feb.23. Kindly advise whether I have to kept Rs.6.00 lakh (i.e.Gain15.00 lakh minus 9.00 lakh cost of Plot) in Capital Gain Account Scheme for the construction of House OR I have to kept whole money of Capital Gain i.e. Rs.15.00 lakh in the CGAS. How much Amount I have to show in the IT Return for AY 2023-2024 ?

Ans: As per the provisions of the Income Tax Act in India, if you have made a capital gain from the sale of a residential property and wish to claim exemption under Section 54F by investing in a new residential property, the following rules apply:

- You can claim exemption on the capital gains if you invest the entire amount of capital gains in a new residential property. In your case, the total capital gain is Rs. 15.00 lakh, and you have utilized Rs. 9.00 lakh to purchase the residential plot. To claim the exemption, you must utilize the entire Rs. 15.00 lakh amount for the construction of the new house.

- If you are unable to invest the entire capital gains amount before the due date of filing your income tax return (usually July 31st of the assessment year), you can deposit the unutilized amount in a Capital Gain Account Scheme (CGAS) before the due date to claim the exemption. In your case, if you haven't utilized the entire Rs. 15.00 lakh for purchasing the residential plot and construction has not yet begun, you must deposit the unutilized amount of Rs. 6.00 lakh in the CGAS.

- In your Income Tax Return for AY 2023-2024, you need to show the capital gains from the sale of the residential property, which is Rs. 15.00 lakh, and then claim the exemption under Section 54F for the amount utilized to purchase the residential plot and construct the new house (i.e., Rs. 9.00 lakh). Additionally, you should mention that the remaining Rs. 6.00 lakh is deposited in the CGAS for the purpose of constructing the new house to claim the complete exemption.

Please note that to avail of the exemption under Section 54F, you need to fulfill all the conditions mentioned in the section, such as not owning more than one residential house (excluding the new one) on the date of transfer of the original property and not purchasing any other residential property within a specified time frame.

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I sold property on 29th April 2024 untill when I can put money in CGAS? Also if I book a property say for 40 lakhs and possession will be another 4-5 years I can claim 40 lakhs from my capital gains ?

Ans: 01. You can deposit Capital gain amount in Capital Gain Account Scheme with any Public Sector Bank, on or before the last date of filling of your ITR. In your case it shall be JULY-2025.
02. You may book a property (Constructed Residential House) worth Rs.40.00 lakhs, BUT it should be transferred in your name with in a period of 2 years from the date of sale of Property.
03. In absence of information about the Sale Value of property, please note that your exemption shall be limited to Rs.40.00 lakhs (amount Invested).
Most welcome for any further clarifications. Thanks.

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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