Buy new house property and also save taxes- section 54 of IT Act

At times we intend to undertake a financial transaction but delay it as we are not sure of the tax implication of the same. One such financial transaction is “ Selling off old house property, we keep pondering on the tax implications of it, such as,how to invest the sale consideration to have best return and also save taxes. The Indian Income Tax Act has in-built provisions, which if implemented, can act as investment and tax planning options What does section 54 says: The income arising from sale of long-term capital asset (being buildings or lands appurtenant thereto,) and being a residential house, shall be exempt to the extent such income is invested in the purchase of another residential House Property within the stipulated time. Further, the new house purchased or constructed should not be transferred within a period of 3 years from its acquisition, and if sold, then within a period of 3 years from its purchase, then for the purpose of computing capital gain on this transfer, the cost of acquisition of this House Property shall be reduced by the amount of capital gain exempted under this section earlier. The capital gain arising on this transfer will always be a Short Term Capita Gains. Further, the amount of the capital gain which is not utilized by the assessee towards the purchase of the new house property before the date of furnishing the return of income under section 139, shall have to be deposited by him before furnishing such return in an Capital Gain Account Scheme and such return shall be accompanied by proof of such deposit. The amount, if any, already utilized by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset. If the amount deposited is not utilized wholly or partly for the purchase or construction of the new asset within the period specified then, (i) The amount not so utilized shall be charged to tax as the income of the previous year in which the period of three years from the date of the transfer of the original asset expires; and (ii) The assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid. Timely and efficient tax planning go long way in lowering your total taxes by employing and taking advantages of in-built provisions of tax exemptions, deductions, concessions, rebates, reliefs, allowances and other benefits granted by the tax laws so that the incidence of tax is reduced. We at have the expertise to guide you in lowering your tax outgo and thus enhancing your total take away.  We at provide full year support solving all your tax issues, in addition to filing of your return of income with excellent tax planning. Please join us now in pursuit of simplifying individual taxation! Alok Patnia Founder and Director at

Leave a Reply

Your email address will not be published.