How to reinvest capital gains for sale of multiple properties?- Property Hotline

Expert: Shipra Padhi, Member - International Tax Practice at Nishith Desai Associates.

Question: I purchased a small residential plot and two small size apartments over 10 years ago. I plan to consolidate my investments by selling all three and buying a bigger apartment by reinvesting my entire long-term capital gains in this new property. My queries are as follows:

1. Is there a limitation on number and types of residential properties that can be clubbed for reinvestment as long-term capital gains in a financial year?

2. Will the above transaction qualify for nil tax?

3. What date will be taken for calculation of holding period to qualify long term capital gains?

Answer: The following answers for these queries are:

1) Clubbing of properties is not restricted to the extent that only one residential property is purchased. All other conditions should be satisfied.

2) Yes, provided all conditions for capital gains tax exemption are satisfied. And the new house is held for at least three years from the date of sale.

3) Date of booking / application, Date of signing of Builder Buyer Agreement, Date of offer of possession, Date of actual possession, Signing of conveyance deed

For qualifying under section 54, the date of possession will be taken into account. Before that, the capital asset is in the nature of a right to the conveyance.

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