How to avoid tax burden on reinvesting capital gains?- Property Hotline

Expert: Pannkaj Ghadiali, Managing Partner at PC Ghadiali and Company LLP.

Question: I had a 1BHK flat in Yerwada, Pune that I bought in 1996-97 for Rs 3.75 lakh and I sold it in 2016 for Rs 25 lakhs. I kept the money in a capital gains account in a nationalized bank. I am told that it is taxable at 20%. Please guide me on how I can reinvest the money to avoid the tax burden. How much of the amount is taxable? Can I invest this money in agricultural land in my home town? Cost of residential properties is beyond my capacity. A local tax consultant told me that the period to invest in bonds is also over.

Answer: You have not mentioned the date of sale or the date of investment in capital gains account scheme. The law says that you need to invest in the capital gains account before the due date of filing your return of income. Presuming that you have deposited the amount in the capital gains account scheme within the prescribed time, you will get the benefit of exemption of long term capital gain. The money invested in capital gain account scheme has to be utilized for the purchase of residential property within 2 years from the date of sale or for an under construction property within 3 years from the date of sale. Having already made the choice of investment, now you cannot withdraw the amount for any other purpose. If you want to invest in agricultural land, you cannot get the exemption from capital gains. For investing in specified bonds, you need to invest within 6 months from the date of sale.

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