CHEQUE BOOK

HT Estates - - HTESTATES - Harsh Roongta

I pur­chased a res­i­den­tial land in the year 2006 for ₹ 7 lakh. Now I want to sell it. Its ap­prox­i­mate cost is ₹ 30 lakh. I would like to know if I can invest this amount in pur­chase of another res­i­den­tial land and sub­se­quently con­struct a house on it within three years to save in­come tax on long-term cap­i­tal gain. If not, how can I save tax on long-term cap­i­tal gain?

—Ro­hit Katyal Yes, you can invest the pro­ceeds of the sale of the res­i­den­tial plot for pur­chase of a res­i­den­tial plot and con­struct the house on the same within a pe­riod of three years. As per sec­tion 54F of the In­come Tax Act, you can claim cap­i­tal gains ex­emp­tion on longterm cap­i­tal gains aris­ing on sale of a cap­i­tal as­set other than a res­i­den­tial prop­erty. For avail­ing this ex­emp­tion, you are re­quired to invest the net sale con­sid­er­a­tion for con­struc­tion of a house within a pe­riod of three years.

The amount of ex­emp­tion will be equiv­a­lent to the pro­por­tion the newly con­struct- ed house bears to the net con­sid­er­a­tion re­ceived on sale of your res­i­den­tial plot. If the amount is not fully in­vested by the due date of fil­ing of your in­come tax re­turn, the unutilised amount has to be de­posited in a cap­i­tal gains ac­count to be opened with the au­tho­rised banks. The money so de­posited can be utilised for con­struc­tion of the house within the three-year pe­riod.

The con­struc­tion must be com­pleted within three years to avoid any lit­i­ga­tion. Though you will be in­vest­ing whole of the sale con­sid­er­a­tion for pur­chase of another res­i­den­tial plot, you will be able to claim cap­i­tal gains ex­emp­tion un­der Sec­tion 54F as long as the con­struc­tion of the house is com­pleted within three years. To be el­i­gi­ble to claim re­lief un­der sec­tion 54F, you should also ful­fill other con­di­tions re­lat­ing to own­er­ship of the other house and re­tain­ing the house you con­struct. I am a housewife and I can pay ₹ 10,000 per month as an in­stall­ment to­wards home loan. Can you tell how much loan can be sanc­tioned and what will be the in­ter­est rate?

— Nisha Arun Since you are a housewife it will be im­pos­si­ble for you to get a home loan on your own from any fi­nan­cial in­sti­tu­tion, as banks re­quire proof of con­sis­tency of in­come to ser­vice the loan. How­ever, if your hus­band ap­plies for a home loan, the lender may grant him a loan on the ba­sis of his in­come and you can join him as a co-bor­rower of the loan.

If your hus­band is be­low 40 years of age, as a thumb rule, he should be el­i­gi­ble for around four to 4.5 times his net an­nual in­come sub­ject to a max­i­mum of 80% (90% for loan amount be­low ₹ 20 lakh) of the agree­ment value of the prop­erty as a loan.

He will also have to pay for stamp duty and reg­is­tra­tion charges, as the banks no longer fund th­ese charges. The over­all el­i­gi­bil­ity will be based on your hus­band’s in­come, reg­u­lar out­go­ings and his re­pay­ment track record. The cur­rent float­ing rate of in­ter­est for loan amount be­low ₹ 75 lakh is 10.15% to 10.25% per an­num. I have ap­plied for a home im­prove­ment loan from a bank, and it is almost ap­proved. The bank wants me to fur­nish cost es­ti­mates, so that they can give me the amount that I have spent in do­ing up the house. But I do not have much cash to spend. Is it pos­si­ble to get the whole amount be­fore­hand?

—Naresh Gupta Some banks sanc­tion up to 75% of the pro­jected cost as loan for home im­prove­ment. But you will have to bring in your en­tire con­tri­bu­tion first. Once you have spent your con­tri­bu­tion, you can re­quest the bank to dis­burse the loan amount to you or in favour of the con­trac­tor. Harsh Roongta is CEO, Apna Paisa. He can be reached at ceo@ap­na­paisa.com

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