I recently sold a house property and earned capital gains. In order to avoid CG tax, I want to invest part of it in the construction of 1st floor in my present house. Is this permissible?
2006-11-02 03:25:02 · 2 answers · asked by Rajagopalan R 1 in Business & Finance ➔ Taxes ➔ India
I don't think so..however, I do believe that the tax credit for the addition will probably offset the capital gains tax you'll have to pay...will probably come out in the wash!
2006-11-02 03:41:55 · answer #1 · answered by Shelly B 5 · 0⤊ 0⤋
Yes , you can . The Income tax Act states that whoever , sales a residential house , long term capital gain can be exempt u/s 54 if he invests in "a residential house" as per the specified condition in Section 54 of the I T Act.
The confusion is created because your construction on the roof of the house .And all understand that the house constructed on the roof has no separate identity than the house on which it has been constructed.
In my opinion , you will get the exemption because what lawmakers intended u/s 54 of the Act that a person who sales a HOUSE , should not be taxed if he invests re amount for Constructing a residential house. It hardly matters if, the house is on roof of already owned by you.
You will be happy y\to know that similar issue was raised in the case of CIT vs Narshimha PV 181 ITR 101 wherein Madras High Court ruled that assesse is entitled to exemption u/s 54 even if the capital gain on the construction of new floor on another house owned by him.
So just claim the exemption and arrange party for me
2006-11-04 10:04:07 · answer #2 · answered by q4tax 3 · 0⤊ 0⤋