How can I sell a flat in Nasik and buy another in Pune while shifting the home loan to my son?

I have two flats in Nasik and I want to sell one house in Nasik. I am the First owner second is my wife. I want to purchase a new flay at Pune. I wish to take the remaining home loan in my son's name. Please guide me for income tax benefits. - Nirmal

In order to save such capital gains tax, the seller may consider availing exemption u/s 54 by way of re-investing the capital gains proceeds in a new house property in India subject to the following conditions:

The new residential house property must be purchased 1 year before or within 2 years after the sale of the house and in case of construction, such construction should be completed within 3 years after the sale of the house.

Such house property purchased/constructed should be situated in India.

The new house property purchased would be subjected to a lock-in period of up to 3 years from the date of purchase.

In case the investment in the new house property is not made before furnishing the tax return, the exemption can still be claimed by depositing the amount of capital gains in the Capital Gains Account Scheme.

The amount of exemption would be lower of the capital gains arising on the sale of the house or the investment in a new house property.

Further, as the property is co-owned by the assessee and his wife, the aggregate of the capital gains exemption shall be allowed in proportion to the share of the respective co-owners of the house.

Tax benefits on home loan

If the home loan is taken in the son’s name for purchasing the new flat, he can claim tax benefits on the interest paid on the home loan under Section 24(b), which allows a deduction of up to Rs 2 lakh per financial year on interest paid for a self-occupied property. Further, please note that generally, the bankers insist that the borrower (in this case your son) should also jointly own the new property which you are proposing to purchase in Pune.

Additionally, the son can claim a deduction of up to Rs 1.5 lakh under Section 80C for the principal repayment of the home loan.

As such, selling the flat in Nashik and purchasing a new one in Pune can provide significant tax benefits if you reinvest the capital gains appropriately and utilise home loan deductions effectively.

(Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)