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by **cherry** » January 8th, 2010, 1:02 am

I sold my property - a site and a house built on it - in a BDA layout for Rs 70 lakhs in June 2008 and purchased a property - a site and a very old house on it (ground floor built in 1978 and first floor built in 1990) - in another BDA layout for Rs 50 lakhs in the same month - June 2008, through a registered sale deed. Since the house was very old I spent Rs 6 lakhs on repairs and improvements. Out of the sale proceeds of Rs 70 lakhs, I spent about Rs 5 lakhs on stamp duty and registration of the property I purchased. I want to give Rs 5 lakhs to my wife who has applied to buy a small site at Bangalore by paying an initial deposit only. What is my capital gains tax liability? How I can save on my capital gains tax liability? What is the period within which and the mode by which I should invest to save on tax liability?

Assuming the old house in the BDA layout was held for more than three years as on date of sale, you would be entitled to a deduction under Section 54 to the extent of Rs 61 lakhs from the capital gains (i.e. net sale consideration minus the indexed cost of acquisition). Rs 5 lakhs paid to your wife would be irrelevant to the present matter of tax planning. One should buy a residential property one year before or two years after, or construct within three years, from the date of sale of the residential property on which capital gains exemption is to be availed. For this, there are other conditions which also need to be fulfilled as prescribed under Section 54 of the Income Tax Act.

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Saving on capital gains tax liability >>

Saving on capital gains tax liability

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