Saving capital gain tax on commercial property by buying property

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This topic contains 1 reply, has 2 voices, and was last updated by Dr. Ashok Dhamija Dr. Ashok Dhamija 1 year, 1 month ago.

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  • #1597

    Anonymous
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    Hello Sir. Last month I sold one office in a commercial area and the total sale value is Rs 43 lakhs. it was purchased by me in 2009 for Rs. 18 lakhs. How can I save the capital gain tax? Can I buy another commercial property or a residential property to save this tax?

  • #1642

    You cannot save capital gain tax by purchasing another commercial property. However, you may be able to save capital gain tax by purchasing a residential property, under Section 54-F of the Income Tax, if the conditions mentioned therein are fulfilled. Some of these conditions are as under:

    • within a period of one year before or two years after the date on which the transfer took place, the assessee should have purchased a residential house, OR, within a period of three years after that date constructed a residential house.
    • the assessee should not own more than one residential house, other than the new asset, on the date of transfer of the original asset.
    • the assessee should not purchase any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset;
    • the assessee should not construct any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset;
    • the total (net) sale consideration (and, not merely the capital gain amount) has to be invested in the new residential house;
    • if the cost of the new asset is less than the net sale consideration in respect of the original asset, saving of the capital gain tax will be reduced proportionately.

    Please read Section 54-F of the Income Tax Act for more details on this issue.

         


    Dr. Ashok Dhamija is a New Delhi based Supreme Court Advocate and author of law books. Read more about him by clicking here. List of his Forum Replies. List of his other articles. List of his Quora Answers.

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