Dear Sir,

                I purchased a plot in the year 2004-2005 and constructed the house. The plot was purchased for Rs.2.75 lakh and the construction cost was Rs.10.00 lakh approx ( Total Rs.13.00 Lakh). Recently in June'2014 i sold the property for a value of Rs.29.00 lakh and on advise of a friend i deposited the whole amount i.e Rs.29.00 lakh in SBI Capital gain account. Now i am planning to construct a new house. So i want to know

1. Whether i have done the right thing by depositing the entire net consideration amount in the capital gain account ?

2. Whether i can buy plot for construction of new house from the capital gain account. i.e paying the seller by drawing amount from the capital gain account.?

Please clarify

Pramod H

2. 

Dear Pramod,

Yes, you have done right tax planning by depositing the amount in capital gain account. You may also withdraw the said amount and pay for the new property.

Kind Regards
TaxReply.com

 

YOU CAN PURCHASE THE PLOT AND CONSTRUCT FROM THE MONEY LYING

IN CAPITAL GAIN ACCOUNT AND TAKE THE EXEMPTION UNDER CAPITAL GAIN TAX

 Dear Pramod

As mentioned  by others , you have done a right ting. However you may note that on a sale of residential house, and purchase of residential house is covered by section 54, and only the capital gains , need to be invested. So even if the total-cost of the construction is not 29 lakhs, you need not worry. you can withdraw the excess money after taking the  prmision from the ITO