REINVESTING PROCEEDS OF CAPITAL GAINS, Income Tax

[Srinivasan Krishnan]

Dear Forum Members

I had sold a property in June 2013 and out of the Capital Gains arising out of the sale of the property, I have invested in land and building. As per the Income Tax Act I had to invest ₹ 46 Lakhs either towards an apartment by June 2015 or buy a land and construct a house by June 2016 to avoid paying Capital Gains Tax

I bought a vacant land in September 2015 for ₹ 90 Lakhs (much more than the Capital Gains that I needed to invest as this is the only land I could afford in the fringes of the city) and commenced construction in November 2015. On completing the foundation and plinth I ran out of funds and I could not complete the construction. As per the Income Tax act I need to have completed the house construction by June 2016. But there is no way I can complete the construction by June 2016 as I do not have the necessary funds to complete the construction

I have an Electricity Connection and a certificate from the contractor for completing the foundation and plinth. Is this good enough for Income Tax or would I have to pay Capital Gains tax as I have not completed a house or a dwelling unit

Suggestions from experts will be appreciated

Regards

Srinivasan Krishnan

Chennai

Posts / Replies

[MARIAPPAN GOVINDARAJAN]

In my view you to have to complete the construction to claim exemption from capital gains tax.

[Srinivasan Krishnan]

Thank you Mariappan Sir

Thank you Mariappan Sir for your advice. I have another query

I had sold the Plot in Feb 2014, the capital gains of ₹ 45 Lakhs is parked in a Capital Gains account Scheme in an authorized bank. I need to reinvest by Feb 8, 2017 in an residential house (not an apartment as the 2 year time period has expired for buying an apartment)

It is now almost 2 years 10 months since I sold my plot. The query I have is

Can I buy a built old residential house within the next 2 months to claim the capital gains benefits or should I buy a Plot and construct a house within the next 2 months to claim the capital gains benefits

Your advice will be greatly appreciated