While using own funds, the following issues need to be considered:

  • If the house is being acquired out of the sales proceeds of an earlier house, the exemption from the long-term capital gain tax on the sale of the earlier house can be claimed under u/s. 54. To claim this benefit, the new property should be acquired one year prior to selling or two years after the date on which the transfer of the earlier house takes place.
  • If the new house could not be acquired within a period of one year from the sale of the earlier house, the sales proceeds should be deposited in a bank or institution, which runs Capital Gain Accounts Scheme approved for this purpose.
  • Other issues also need to be considered like if the person acquiring a house already holds another house, then every year, one of the two house property would be deemed to be let out (u/s. 24) of income tax Act and the let-out value shall be treated as income. Hence, appropriate tax planning should be considered.
  • Further, in the case of individual or HUF (Hindu Undivided Family), exemption is provided from long term capital gain tax u/s. 54F on sale of any long term capital asset, if sale proceeds are invested in acquiring a house within prescribed period. So, a house can be acquired to save on long term capital gain on sale of long term capital assets.
  • We are not giving legal or financial advice and one should consult a appropriate consultant, advisor etc.

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