sir I have purchased site maesuring 40x60 ft in 2013 for Rs 10 lakhsand consructed a house in 2013 incurring 20 lakhs ,with following all rules by the local authority by paying all the taxes.0n 23.4.2023 i have sold the house for 60 lakhs.on 28.4.2023 i have purchased site for Rs 23lakhs without depositing the amount in capial gain account.kindy advice me whether i can claiim capital gain for purchased site as per sectio 54 of income tax.i do not have any docuentary proof for amount incurred for house construction and can i claim house improvement as capital gain exemptions.thank you sir.hope you will reply at an earliest.Iam a senior sitizen and an agriculrist
Ans: Based on the information you've provided, here's a breakdown of your situation:
Sale of Residential Property: You sold your house on 23.04.2023 for Rs. 60 lakhs.
Purchase of New Property: You purchased a new site on 28.04.2023 for Rs. 23 lakhs.
Capital Gains: You potentially have a long-term capital gain from the sale of your house.
Documentation: You lack documentary proof for the construction cost of your house.
Potential Issues and Considerations
Capital Gains Exemption Under Section 54:
To claim exemption under Section 54, you generally need to invest the capital gains in another residential property within a specified timeframe.
While you purchased a new site, it's not a residential property yet. You would need to construct a house on it within the prescribed time limit to qualify for the exemption.
The amount invested in the new property should generally be equal to or more than the capital gains to claim full exemption.
Proof of Construction Cost:
Lack of documentary proof for construction costs might be a challenge. You may need to explore alternative evidence or methods to substantiate the expenditure.
Consider consulting with a tax professional to discuss potential options and strategies.
Timelines:
The specific timelines for investing the capital gains in a new residential property under Section 54 are crucial. Ensure you comply with these requirements.
Recommendations
Consult a Tax Professional: Given the complexity of the matter and the potential implications, seeking expert advice is highly recommended.
Gather Relevant Documents: Collect all available documents related to the sale of your house, purchase of the new site, and any construction-related expenses.
Explore Alternatives: If claiming exemption under Section 54 is not feasible, consider other potential tax-saving options.
Act Promptly: Timelines for claiming exemptions and potential tax implications are important. Don't delay in seeking professional guidance.
It's crucial to consult with a chartered accountant or tax expert for personalized advice based on your specific circumstances.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
