I intend to buy a house by selling stocks. Can I claim an income tax exemption?

I have two residential properties in my name purchased over 8 years ago. I plan to buy another residential property in the next few months. I plan to fund this purchase with the long-term gains from selling stocks this fiscal year. Will the gains from the sale of shares in this financial year be taxable or can an exemption be claimed for the purchase of residential property in the following financial year with respect to capital gains? values ​​on the sale of the shares?

Answer: With respect to capital gains resulting from the sale of any asset other than a dwelling house, an individual or HUF may claim a long-term capital gains exemption if the net consideration of the sale relating to this asset is invested for the acquisition of a dwelling house within a period of two years after the sale of this asset. Even if a dwelling house is purchased within the year prior to the sale of those assets, the exemption is still available. If you want to build a house yourself or book a house under construction, you have an extended period of three years to complete the construction of the house or take possession of it if it is booked with a developer.

In the event that the sale consideration is not fully utilized for the acquisition of the dwelling house by the tax return filing due date, the unused money must be deposited with a bank under the Capital Gains Account Scheme. The money thus deposited can be used within the prescribed period for the payment of the house.

One of the conditions for qualifying for this exemption under Section 54F is that you must not own more than one dwelling house at the date of sale of the asset, except the one for which you are claiming the exemption. Since you already own two homes now, you are not eligible to claim this exemption available under Section 54F.

Balwant Jain is a tax and investment expert and can be reached on [email protected] and @jainbalwant on Twitter.

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