How to save capital gains tax?

By: |
Published: January 10, 2018 2:12:18 AM

For the first question, you can invest the proceeds from sale of more than one house property into one house property and deduction for capital gains shall be available on investment in one residential house property in India.

how to save tax, save tax on capital gain, fe queries, financial express queriesFor the second question, there is no restriction on investing in new property through borrowing and deduction of capital gain is allowed if the construction has been done within three years from sale of the house.

Can we invest the proceeds of more than one house property into one house property? Can the shortfall for new property, first borrowed from son and paid back on sale of next property, be adjusted within three years for under-construction property. Can the sale value of inherited property be added into the cost of new house and thus save long term capital gains tax?
– Sanjay Singh

For the first question, you can invest the proceeds from sale of more than one house property into one house property and deduction for capital gains shall be available on investment in one residential house property in India.
For the second question, there is no restriction on investing in new property through borrowing and deduction of capital gain is allowed if the construction has been done within three years from sale of the house.
For the third question, cost of new house would be the amount that you invest in buying it and can include all incidental expenses like stamp duties, brokerage, etc. Any other amount can’t be claimed as cost of a property.

My father owned a property jointly with his brother since 1995 but in 2017 the latter made a transfer deed in the name of my father. But now my father wants to sell the property. Will he have to pay tax on the proceeds?
—Prem Kumar
On sale of the property by your father, he would be liable to tax on capital gains. However, he can claim deduction by investing the capital gains in another residential house. He can buy the new house within the next two years or construct a new house within the next three years from the date of sale of this house. Till the time amount is invested, he is supposed to deposit this amount in Capital Gains Account Scheme with a scheduled bank before the due date of filing next income tax return. However, he cannot sell this new house within next three years. Alternatively, he can invest the capital gain amount in specified bonds (like bonds of NHAI and REC) within six months from the date of sale of the house. However, he cannot sell these bonds or take a loan against these within the next three years; otherwise, the capital gain exempted earlier would be taxed in the year of sale of, or availing of loan against, these bonds.

The writer is partner, Ashok Maheshwary & Associates LLP. Send your queries to fepersonalfinance@expressindia.com

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.