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If you sell your house, you can claim capital gains exemption under Section 54, provided you purchase another house within two years or construct one within three years. Again, if you sell this house within three years, you will lose the exemption. You are also allowed capital gains exemption up to Rs 50 lakh if you invest the proceeds from selling the house in capital gains bonds. Again, if you don’t hold the bonds for three years, that is, if you sell the bonds or borrow against there, the benefit will be withdrawn. “Today, you have to transfer the money from selling your house to a Capital Gain Account Scheme. If you withdraw for any other purpose you need a no objection certificate from the I-T department. This is one way the authorities will be able to trace if funds are being used for purchase of property,’’ says Suresh Surana, founder, RSM Astute Consulting Group. In addition, since the property is sold within three years the seller will have to pay short-term capital gains tax, which is higher. So, it is a double disadvantage, Surana adds.ALSO READ: I-T dept launches ATM-based validation facility for e-filing
Life insurance: Life insurance premium paid on the life of self/spouse/child is eligible for deduction under section 80 C. However, there is minimum period of holding of two years for the policy. If the policy is surrendered before two years, the deduction claimed will be reversed and has to be offered as income. Tax-saver bank fixed deposit: Investment in an eligible fixed deposit (five-year lock in period) can be claimed as deduction under section 80 C. If the lock in period condition is not met, the amount claimed as deduction in the past needs to be offered as income in the year in which the FD is redeemed (without meeting the five-year lock in period). “In case the holding period conditions are not met and the assessing officer finds out, the taxpayer can be subjected to a penalty during the assessment proceeding. The quantum of penalty may vary from 50 per cent to 200 per cent of the tax liability on the under-reported/misreported income,” says Amarpal Chadha, of EY.
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