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"Tax On Long-Term Capital Gains Slashed If Invested In Residential House Property"


Yes, the investment in a residential house property also plays a key role in saving long-term capital gains. This aspect is of particularly great importance and practical use for all those persons who are interested to save income tax in respect of the long-term capital gains arising to them.


As per the provisions of Section 54F of the Income Tax Act, 1961, it is possible for any individual so also for the HUF to save income tax in respect of long-term capital gains arising to them from any capital assets other than the residential immovable property.

Thus, if you are selling either your shares or mutual funds or jewellery or commercial property or land and you are deriving long-term capital gain, then it is legally possible for you to cut down your payment of income tax on the long-term capital gains derived by you by selling either the shares or the bonds of mutual fund or even your jewellery or the commercial property.


Those who are interested to take advantage of this provision should ensure that such persons should not own more than one residential house property in their own name. Thus, if you are owning already one residential house property then also it is possible for you to save complete income on long-term capital gains on selling your movable assets provided you just make the investment equity net sale proceeds within 3 years from the date of sale in constructing a new residential house property.


If you are not interested to make investment in the construction of your sweet residential house property then you may even go in for buying readymade apartment, villa or a flat or a floor. The readymade house property has to be purchased by you within two years of the date of sale of other capital assets like shares, mutual funds or jewellery, etc. It can be purchased one year in advance also. Thus, it is legally possible for you to cut down your payment of tax on long-term capital gain if you make investment in residential house property.


It will be worthwhile to note that the benefit of this section is not permissible on your investment in commercial property. Another important factor which makes this theme interesting is that nowadays you can enjoy and take advantage of this benefit even if you are the owner of one residential property. Besides, under Section 54 income tax on long-term capital gain on the transfer of a residential house property can be fully saved if the net capital gain is invested in a residential house property within the same 1, 2 or 3 years as aforesaid.

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