Friends,
Under Income Tax Act there is a provision for a rebate u/s 80C for Home Loan taken for Construction of house. But if someone sales the house in question within 5 years the benefit taken on this regard will be reversed. Some questions regarding this are given below :-
I had purchased a house in an under construction building in the March 2006. Had taken a loan from HDFC for the same. Got the possession of the house in November 2006.Having paid all the respective dues to the builder we starting paying the EMI to HDFC from April 2006 onwards to HDFC bank.
I have sold this property in the month of January 2010.
Qtn 1. please advised if this comes under short term capital gains or long term capital gains
Qtn: 2, In 2009 August we bought a house taking a fresh loan from HDFC bank.can I use the money from the above sale to pay of this loan and waive of the tax.
Qtn:3 I already have one property in my name, can I buy a second property to waive of the tax
Qtn 4 : alternative, i can buy land in my home town.
Point wise answer to your queries is given here under.
Ans1:You have given followings facts.
1. Under construction house Purchased in March,2006
2. Possession of the House has been taken in November,2006
3. Loan Repayment to HDFC has been started in April ,2006
4. Due to Seller /Builder has been Given By April 2006
From this facts ,I can conclude that the Property has been transferred in March 2006 it self , as the Bank provides Loan only after registration on your Name .So purchase date I assume that in March 2006.Now you have sold the House in January ,2010 so total holding period is more than 3years(Jan,2010-March ,06) ,so the Capital gain is Covered under Long Term Capital Gain.Even if Date of purchased is considered as November 2006(Jan,2010-November,2010) ,then also it is covered under Long term capital Gain.
Ans:2 Long term capital gain on House transfer ,can be saved by Individual under section 54,the detail of the section are
Capital gain arising from sale of above said property will be saved up to the amount used in
to purchase a residential house within year before the date of transfer of old house or
Purchase a residential House within two year after the date of transfer of old house.
or construct a house with in three year from date of transfer of old house property.
Capital gain is saved up to the amount which is used in to buy /construct new house,if amount used for house purchased/construction is less than the amount of capital gain than the balance amount will be taxed as long term capital gain.In Simple words ,the requirement under this section is to Invest only amount up to Capital gain and not Total Net Sale proceed Collected from house sold .
I have sold this property in the month of January 2010.
Qtn 1. please advised if this comes under short term capital gains or long term capital gains
Qtn: 2, In 2009 August we bought a house taking a fresh loan from HDFC bank.can I use the money from the above sale to pay of this loan and waive of the tax.
Qtn:3 I already have one property in my name, can I buy a second property to waive of the tax
Qtn 4 : alternative, i can buy land in my home town.
Point wise answer to your queries is given here under.
Ans1:You have given followings facts.
1. Under construction house Purchased in March,2006
2. Possession of the House has been taken in November,2006
3. Loan Repayment to HDFC has been started in April ,2006
4. Due to Seller /Builder has been Given By April 2006
From this facts ,I can conclude that the Property has been transferred in March 2006 it self , as the Bank provides Loan only after registration on your Name .So purchase date I assume that in March 2006.Now you have sold the House in January ,2010 so total holding period is more than 3years(Jan,2010-March ,06) ,so the Capital gain is Covered under Long Term Capital Gain.Even if Date of purchased is considered as November 2006(Jan,2010-November,2010) ,then also it is covered under Long term capital Gain.
Ans:2 Long term capital gain on House transfer ,can be saved by Individual under section 54,the detail of the section are
Capital gain arising from sale of above said property will be saved up to the amount used in
to purchase a residential house within year before the date of transfer of old house or
Purchase a residential House within two year after the date of transfer of old house.
or construct a house with in three year from date of transfer of old house property.
Capital gain is saved up to the amount which is used in to buy /construct new house,if amount used for house purchased/construction is less than the amount of capital gain than the balance amount will be taxed as long term capital gain.In Simple words ,the requirement under this section is to Invest only amount up to Capital gain and not Total Net Sale proceed Collected from house sold .
As given above as per section 54 ,New house can be purchased within one year before the transfer of new House.In your case you have sold House in Jan,2010,so House purchased in August ,2009 is eligible for Exemption under section 54.Further if you repays the HDFC bank loan taken on new house then the same amount will be eligible for exemption under section 54.
Ans 3: The section 54 is applicable where you have sold a house and after that invested the Long term capital gain in New house.Under section 54 there is no bar on number of houses you have or on houses purchased in future.The restriction on number of houses is placed under section 54F.Even in section 54F ,you can purchase new house ,if you already have another house on your name(read 54 F from here).This section(54F) is applicable where the Asset sold is other than House . (read Section 54F Vs 54EC from here).The only restriction under 54 is that if you will sell the New house before 3 years of purchase then the cost of that house will be reduced by the capital gain exempted on sale of original(OLD) house.
Ans-4:Yes you can also Invest amount in Land but condition is that you will construct a house on that land with three years from the date of sale of old house .So in your case construction should be completed by Jan ,2013 on that land.Further if amount invested in land is less than the capital gain amount on sale of House (sold in Jan ,2010) then to claim exemption in this year ,you have to deposit Balance amount in Capital gain account scheme ,1988 before the due date of Return .In case of individual due date in non audit cases is 31st July .
Example: Suppose you have Long term capital gain on your house sold in Jan,2010 is 20 Lacs.And Land proposed to be purchased is Just of 12 Lacs then to save complete Capital gain you have to deposit 8 Lakhs in capital gain account scheme by 31st July ,2010.Further You have to use amount deposited in capital gain scheme by Jan , 2013.Otherwise unused amount will be taxable in Fy 2012-2013. (read section 54 Details here)
Reverse Of section 80C benefits
One more point ,I would like to point out here that as Per section 80C ,if a person is claiming House loan repayment benefit under section 80C and have sold the House within 5 years from thr end of Financial year in which House has been purchased then all the benefit availed under this section (80C) of earlier years will be reversed and included in the taxable income of the year in which house has been sold.
In your case you have purchased house in March ,2006 and sold the same in Jan,2010 means before the expiry of the five years from the purchase of the house , so tax benefit (if any ) on repayment of house loan)availed by you under section 80C ,In Financial year 2006-07,2007-08,2008-09 will be revered in Financial year 2009-10 and no benefit in Financial year 2009-10 in respect of old house .So keep this point in Mind .
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Reverse Of section 80C benefits
One more point ,I would like to point out here that as Per section 80C ,if a person is claiming House loan repayment benefit under section 80C and have sold the House within 5 years from thr end of Financial year in which House has been purchased then all the benefit availed under this section (80C) of earlier years will be reversed and included in the taxable income of the year in which house has been sold.
In your case you have purchased house in March ,2006 and sold the same in Jan,2010 means before the expiry of the five years from the purchase of the house , so tax benefit (if any ) on repayment of house loan)availed by you under section 80C ,In Financial year 2006-07,2007-08,2008-09 will be revered in Financial year 2009-10 and no benefit in Financial year 2009-10 in respect of old house .So keep this point in Mind .
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