Can I invest mutual fund profits in apartments to save income tax?


Question: As you mentioned in your article, long-term capital gains (LTCG) resulting from the sale of any fixed asset other than a residential house can be claimed as exempt under the u / s section 54F if the proceeds of the sale are invested in a property of a dwelling house, subject to the time limits mentioned therein. This section is silent on the type of long-term capital envisaged when it says “the capital gain results from the transfer of any long-term fixed asset, which is not a dwelling house “I have a significant LTCG from debt mutual funds in the last fiscal year and I will also have the same LTCG in the current fiscal year. In view of the above, I would like to know if I can reinvest the LTCG earned on a debt fund in a residential apartment in the next 2 years. I also want to know if I can claim the refund of the tax paid on LTCG for YY 2021-22 in the future. – P. Acharya

Answer: For the purposes of claiming the Section 54F exemption, all fixed assets, except a dwelling house, are covered, for which a separate Section 54 exemption is available. . Thus, the long-term capital gains exemption on the sale of all fixed assets, including debt funds, can be claimed under Section 54F by investing in residential property within specified time frames.

Please note that for the purposes of claiming the long-term capital gains exemption on the sale of a residential property, you are required to invest only the amount of the calculated capital gains, after applying the ‘residential property cost inflation index under section 54 while for claiming exemption for long-term capital gains resulting from the sale of any property other than residential property under of Article 54F, you are required to invest not the amount of the capital gains but the entire amount of the net sale consideration received. Thus, if you wish to benefit from the exemption provided in Section 54F, you will have to invest the proceeds of the redemption of the debt funds in a residential property.

If you have already paid tax on your long-term capital gains, the law does not provide for a refund of this tax even if you buy a house within the allotted time. However, if you plan to buy / build a property within the prescribed time frame, you can deposit the amount to be invested into a bank account to be opened as part of a capital gains scheme account with a bank. authorized and request the exemption when filing. the ITR to file for the 2021-2022 tax year. Even if you have already deposited the ITR, you can revise the ITR and request the refund if you deposit the amount in the above account before September 30, 2021, which is the extended deadline for filing the ITR for fiscal 2020. -2021.

Balwant Jain is a tax and investment expert and can be reached on jainbalwant @ gmail and @jainbalwant on Twitter

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