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Jun 19, 2012, 03.18 PM IST
Investing funds earned by way of short term capital gains in a new residential property will not help dodge income tax, advises Subash Lakhotia, Tax & Investment Consultant.
"I would like to suggest that whenever you have got long term capital gain only then is it possible for you to save income tax by investing in real estate. If you have a short term capital gain, no tax saving is possible even if you invest the money in residential property," Lakhotia tells CNBC-TV18.
Below is the edited transcript of the interview on CNBC-TV18. Also watch the accompanying video.
Q: I have a fixed deposit (FD) in my name since five years. Can I apply tax benefit using the same FD or should I break the FD and reinvest in a new one for five years to get tax benefit?
A: The best option for you will be to break your existing FD, and the fund being available, invest in a new FD for five years and then claim the benefit of income tax deduction upto Rs 1 lakh under section 80C of the Income Tax Act, 1961. Please do not use the existing FD to renew and get the benefit.
Q: If I earn a short term capital gain and choose to invest the same in constructing a house, is that considered to be tax free?
A: Whether you have sold an old item, plant or land or building or anything, the most important question is what you have sold is in profit then you have got is a short term capital gain. Unfortunately, if you have short term capital gain and you invest the money in acquiring a new residential property, even then, it is not possible for you to save income tax.
I would like to suggest that whenever you have got long term capital gain, only then it is possible for you to save income tax by investing in real estate. If you have a short term capital gain, no tax saving is possible even if you invest the money in residential property.
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