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Capital gains exemption on investment prior to sale permissible

QUESTION: I am borrowing from bank for meeting the cost of a flat. I propose to sell a residential house in my village and use the sale proceeds to discharge my loan. Will such repayment be treated as reinvestment within the meaning of Sec. 54F?

ANSWER: Where the reinvestment in a residential house precedes the sale of another residential house, it has to be within one year before the sale. As long as this time limit is observed, there is no reason why the repayment should not count as reinvestment within the meaning of Sec. 54.

S. Rajaratnam

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