My son sold one apartment in Pune for Rs 80 Lakh which he bought 5 years ago for Rs 60 Lakh. He has another flat in Pune which he got as a gift 3 years ago. Now if he sells this second flat for Rs 60 Lakh to buy another 3 BHK apartment in Bangalore for Rs 80 Lakh, will he have to pay long term capital gain tax? How can he avoid this tax?
-Dr SS Rathaur
As per the details provided, the sale of first apartment will lead to a capital gain of approximately Rs 3.87 lakh (assuming the apartment was purchased in FY 2011-12). However, it is not clear when was the second apartment originally bought and we cannot arrive at the capital gains for it.
Long term capital gains from property sale is exempt if the proceeds are used to buy a residential property within two years or on construction of residential property within three years from the date of sale of your existing properties. The exemption would be equal to the actual amount utilised for the purchase or construction of the residential property. Alternatively, you can invest the money in capital gains bonds specified under Section 54EC within six months of the sale of your house. Please note that these bonds have a lock-in period of three years.