If you have taken the deduction of capital gain in the year of sale of original flat, the construction of new flat had to be completed within three years from the date of sale of the original flat.
I had sold a flat in 2011 and invested the capital gains in another flat under construction. After initial advance payment, the balance amount of capital gain was deposited in the bank. A few installments were paid to the builder by bank directly. Since no progress was observed on construction no further payment was made. How will tax be applicable if I want to withdraw the money?
– SP Karthik
If you have taken the deduction of capital gain in the year of sale of original flat, the construction of new flat had to be completed within three years from the date of sale of the original flat. Accordingly, if any of the amount of capital gains was left unutilised, it should have been taxed under the head ‘capital gain’ in 2014. If you sell this property now, any gains made from this will be treated as capital gains. However, the income-tax department may take a view that the exemption is allowed for buying another residential house, which you never got possession of, and the exemption allowed earlier should be reversed. Hence, you are advised to take the help of a professional in this regard.
I am selling a property for Rs 61 lakh which I bought for `80,000 about 10 years ago. What should I do with the capital gain?
Such long-term capital gain shall be liable to tax. You can claim deduction by investing the capital gains in another residential house. However, if the house sold is not a residential property, you have to invest whole consideration received, otherwise proportionate deduction for capital gains shall be allowed. You 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, you will need to deposit this amount in Capital Gains Account Scheme with a scheduled bank before the due date of filing your next income tax return. You cannot sell this new house within next three years of its purchase, otherwise, the capital gain exempted earlier would be taxed along with the gain of this new house. Alter-natively, you can invest the capital gains up to `50 lakh in specified bonds (like that of National Highways Authority of India and Rural Electrification Corporation of India) within six months from date of sale of the house. You cannot sell these bonds nor 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 firstname.lastname@example.org