I sold a plot, paid part of the money to a builder for a flat and part into capital gain bonds, and I filed my return late. How much of the gain is actually exempt, and what have I already lost?
A resident individual sold a non-agricultural plot at Wagholi, Pune, bought in March 2007 for Rs 9.4 lakh, under a registered sale deed of 18 June 2024 for Rs 2.10 crore, with brokerage of Rs 3.15 lakh paid on completion, so the net consideration is Rs 2,06,85,000 and the transfer falls in assessment year 2025-26. The stamp duty value on the registration date was Rs 2.34 crore, about 111 per cent of the stated consideration. He had booked a flat in a builder's project at Kharadi under an allotment letter of 14 September 2023 and paid Rs 22 lakh on 9 October 2023, Rs 35 lakh on 12 September 2024, Rs 40 lakh on 28 February 2025 and Rs 25 lakh on 9 August 2025, a total of Rs 1.22 crore; the agreement for sale was registered on 6 March 2025, possession is promised for March 2027, the flat stands in his and his wife's joint names and every rupee came out of his own account. He subscribed Rs 30 lakh to notified capital gain bonds on 11 December 2024. Nothing was deposited in a capital gains account at any time. The return for assessment year 2025-26 was filed on 19 December 2025, after the due date, claiming the whole gain as exempt. On 18 June 2024 he owned his self-occupied flat at Baner outright and a one-third share in a house at Nashik that came to him on his mother's death in 2019. The file does not contain the allotment letter or the builder's scheme terms, any instrument or succession record for the Nashik share, the bond application and allotment advice showing the subscription date, the brokerage invoice, or anything showing whether a capital gains account was ever opened; nor does it show whether the Rs 22 lakh paid in October 2023 went towards construction or was only a booking deposit.
Count the residential houses he owned on 18 June 2024, fractions included, before you compute anything at all. The relief he is relying on for the flat is refused outright where the assessee owns more than one residential house other than the new asset on the date of transfer, and that is a gate rather than a proportion: if it shuts, the Rs 1.22 crore paid to the builder shelters nothing and the only relief left in the file is the Rs 30 lakh of bonds. Advisers reach for the arithmetic first because the arithmetic is what the client asked about, and a reply built that way concedes the ownership position by silence, sets out a fraction the officer can attack on a footing the client never chose, and leaves the one-third share in the Nashik house to be discovered by the officer from the return's own property schedule rather than explained on the assessee's terms.
Four separate clocks hang off it: six months for the bonds, one year before and two years after for a purchase, three years after for a construction, and the return due date that governs the deposit obligation. The corpus holds an old Supreme Court entry which says that for immovable property the charge presupposes an effective conveyance, that delivery of possession is not by itself equivalent to a conveyance, and that book entries are irrelevant to the date either way; the library marks that entry unverified, and it construes the provision of the earlier statute, so the widened definition now in force has to be checked before it is leaned on. There is a later Supreme Court entry which took the date back to the execution of an agreement to sell, on the footing that rights had been extinguished and a right to sue for specific performance created, but the court there called the facts peculiar and accepted that in ordinary circumstances an agreement to sell does not transfer the property. A third Supreme Court entry holds that permission to a builder to enter and develop is a licence and not possession, so the date does not move on such an agreement. Here a registered deed of 18 June 2024, with the price paid on completion, makes the answer straightforward; the value of the step is that the date is stated and evidenced before the officer picks a different one to shorten a window.
The relief claimed for the flat carries an ownership gate the parallel relief for a house sale does not: it fails where the assessee owns more than one residential house, other than the new asset, on the date of transfer. The library's entry on the two sections states the gate in those terms. On whether a part share counts, the corpus holds a Tribunal order deciding that it does, wholly or partially owned making no difference, and that order is squarely against this client because the Baner flat plus the one-third Nashik share is then two houses and the entire claim goes. Treat that order with care. The library marks it unverified, records that the Bench did not deal with the two Tribunal decisions the first appellate authority had followed, which hold that fractional ownership is not ownership for this purpose, and records that the High Court authority usually cited alongside it was left standing by a dismissal without reasons rather than affirmed. So the point is genuinely contested at Tribunal level and the corpus holds no entry putting the contrary line into the library. It usually goes against the assessee at assessment stage and is worth taking further only where the share is small, the property is not enjoyed as a house, or the devolution can be shown to have been completed differently; the department runs the order described above and nothing else is needed for it to succeed at the first two levels.
This is where the client's arithmetic is wrong and the difference is large. The library's entry on the two sections states that relief on a house sale runs on the gain, while relief on any other long-term asset is proportionate to net consideration: full exemption only where the cost of the new house is not less than the net consideration, and otherwise the gain multiplied by the fraction the cost bears to net consideration. On these facts Rs 1.22 crore against a net consideration of Rs 2,06,85,000 shelters well under two-thirds of the gain even if every other condition is met, which is not what the client has been assuming. Two limits then have to be checked. The library's entry on the ceiling introduced from assessment year 2024-25 states, and takes from the section text, that cost of the new asset above Rs 10 crore is left out of the computation and net consideration above Rs 10 crore is left out of the deposit limb; take the figure from that entry rather than from memory. It does not bite at this size, but this is a year in which it applies, and the entry flags its own reading of how the ceiling works on a proportionate relief as untested. The stamp duty substitution is live: the library's entry on that section puts the tolerance band at 110 per cent from assessment year 2021-22, and the gap here is about 111 per cent, so on that entry the whole stamp duty value comes in and not merely the excess. Whether the substituted figure then becomes the denominator is divided in the corpus. One Tribunal entry, marked good law and applied by a later coordinate Bench, holds the deeming fiction confined to computing the gain, so net consideration is what was actually received and the whole of the larger gain can still escape charge where the actual consideration is fully reinvested. One High Court entry allowed the whole of what was actually invested against a gain computed on the substituted figure, and the library marks it superseded by amendment on its statutory footing. No entry reconciles them. Compute on the substituted gain and argue for the lower denominator, rather than the other way round.
Two things have to be established and the corpus supports both. First, that a booking of this kind is a case of construction, so the window is three years rather than two. The library holds two Board circulars: the first, about a development authority self-financing scheme, decided that such an allotment is a case of construction for these two sections and recorded that the allottee gets title on the issue of the allotment letter, with instalments a follow-up and possession a formality; the second extends that to societies and other institutions whose scheme terms are similar. The whole test is the similarity, feature by feature, so the allotment letter and scheme terms have to come out of the file and be set against the circular in writing. A High Court entry applied both to a private builder's scheme, but the library records that it did so on a finding that nothing showed the scheme materially different, that the circulars are in terms about these two sections rather than about the question that judgment used them for, and that the challenge to it was dismissed without reasons. The circulars bind the officer where they apply, so this belongs in the reply and not in appeal. Second, that the fact in issue is the money paid inside the window, not possession or a conveyance. One High Court entry, marked good law and expressly followed, holds that what the section requires is that the gain be parted with and invested, and that completion of construction or occupation is not the requirement of law; read it with its own facts, because by the hearing the house there was finished, a registered deed produced and the assessee in occupation, and the library says the follower rested partly on that. A second High Court entry to the same effect, where the only objection was the state of completion on the officer's visit, is marked unverified. An older High Court entry on the parallel relief makes the material test domain over the flat and investment in it, and a Tribunal entry, good law and applied twice since, holds a booking with a private builder counts. On the joint name, two High Court entries hold the section does not require the house to be in the assessee's name only where every rupee came from him and the spouse contributed nothing; the library holds a contrary High Court entry refusing relief where the property stood in a son's name, and warns that the favourable line is confined by its own words to a spouse rather than a stranger. Lead with the bank trail, not with the deed.
Money spent before the asset was sold looks wrong to an officer and is usually given away without argument. The corpus holds a High Court entry, marked good law and recorded as cited in a large number of later decisions, which decides two things on this. There is no requirement that the assessee buy the site out of the sale proceeds; he may build on a plot he already owns. And every investment in that construction within one year before the transfer and within three years after it qualifies, which is what carried the assessee there, whose construction had begun before the sale on borrowed money. That entry is the direct authority for the payment of 9 October 2023, which falls inside one year before 18 June 2024. Two conditions attach. The payment only reaches that entry if the booking is construction rather than purchase, which is the work of the previous step, because the one-year-before limb for a purchase would not carry a payment towards a house that is still being built. And the amount spent after the date of transfer has to stay separately identifiable, because in that case the officer's first objection was that it could not be told apart from earlier spending. Where the corpus is weak: the High Court entry that decided the deposit question the other way records that this judgment was rendered without noticing the deposit requirement, so the department has that on the record and will use it here too.
The deduction limb is expressly subject to the deposit limb: so much of the net consideration as is not utilised for the purchase or construction before the return is furnished must be deposited in a notified account before that return is furnished, and in any event not later than the due date for furnishing the return, with proof filed. The library's entry on the two sections states that, and states that the deposited money must then be used inside the original window, with whatever is left over taxed when the window closes. The fullest High Court entry the corpus holds on the deposit limb goes against this client: nothing having been deposited, exemption was confined to what had actually been spent, and the court refused beneficial construction against what it called the clear words. Two qualifications the library records travel with it. It construes the sub-section as it stood for a much older year, so the current text has to be read before the entry is applied. And it does not decide that utilisation stops at the due date - the assessee there was allowed an instalment paid after the due date but before he filed; what had to happen by the due date was the deposit of what was left. So the number to produce is the net consideration less what had actually gone into the flat by the due date, and the client should be told that figure before any argument is run on it. Be ready for the officer to put the Rs 30 lakh of bonds into the unutilised column as well, since it was not spent on the house, and note that the corpus says nothing either way about that.
The first is that the deposit limb is attracted only where the money is not used. A High Court entry, marked good law and widely cited, holds in terms that the sub-section is attracted only where the consideration is not utilised for purchase or construction, so that an assessee who has in fact invested within the statutory periods cannot be refused relief for want of a deposit. That is the strongest thing in the file and it should be led with, supported by the payment trail rather than by the argument. The second is that the reference to the due date carries the extended filing date with it. Two High Court entries hold that the extension provision is in substance a proviso to the due date provision and is not independent of it, so a purchase or a deposit made before the extended date complies; both are marked unverified with no citator check, and one of them warns expressly that the outer limit under the extension has been shortened since the year it decided, so the date has to be worked out for the year in question rather than assumed. A Tribunal entry, marked good law and applied in two later orders, reaches the same result on facts close to these, where the payments cleared before the extended date and the return was belated. Against all of it stands the entry from the previous step, which declined to follow the first argument, said the requirement of a deposit by the due date appeared not to have been noticed there, and observed that another High Court's view on an all-India statute is persuasive but not binding. Where this usually lands is that the amount actually paid before the belated return is defended and the balance conceded. Here the payment of Rs 25 lakh on 9 August 2025 sits precisely in the contested zone, after the due date and before the belated return of 19 December 2025, and the Rs 22 lakh and Rs 35 lakh and Rs 40 lakh do not need either argument.
This relief behaves differently from the other two and the differences are what decide the number. The library's entry on it states that the relief runs on the capital gain and not on net consideration, so partial investment gives rupee-for-rupee relief up to the ceiling; that the six months run from the date of transfer and not from the year end or the return due date; that there is no capital gains account equivalent and no way to hold the money over; and that from assessment year 2019-20 the section reaches only a gain on land or a building or both, which a plot answers. On the money, take the figure from that entry: Rs 50 lakh, and the entry sets out the second proviso, inserted in 2014, which caps investment across the year of transfer and the following year together, so splitting the six months across a year end buys nothing. The corpus also holds a High Court entry that allowed exactly that split for an earlier year, and the library marks it superseded by amendment by the same proviso; it must not be put in a reply for a current year. On these facts the subscription of 11 December 2024 is inside six months of 18 June 2024 and Rs 30 lakh is inside the ceiling, so this limb is safe on its own terms once the application and allotment advice are on the file. What the client needs to hear is that the remaining Rs 20 lakh of headroom cannot be used now, because the six months closed in December 2024 and there is no deposit route to hold it open. Where the issue itself was shut inside the window there is a High Court entry allowing a reasonable extension, but the library records that the court refused to lay down any general rule and expressly reserved the case of a closure of only a day or two, so it is not an answer to a client who simply did not subscribe in time.
The bond limb survives on these facts and the Rs 30 lakh holds. Everything else turns on the ownership gate, and on the corpus as it stands that is the likeliest place for the claim to die at assessment and first appeal, because the only entry the library holds on fractional ownership is against the assessee and the department needs nothing else. If the gate is passed - the Nashik share is shown to have devolved otherwise, or the contrary Tribunal line is put in and accepted - the realistic outcome is a proportionate exemption computed on the payments actually made to the builder, with the Rs 22 lakh of October 2023 allowed if the booking is established as construction, the Rs 75 lakh paid before the due date allowed without argument, and the Rs 25 lakh of August 2025 contested. What that last figure turns on is which line the Bench follows on the deposit: on the entries reading the extension into the due date it is allowed, on the entry refusing that reading it is not. The stamp duty substitution does not change the exempt amount on the better of the two entries in the corpus, but it does raise the gain against which the fraction is applied, so the tax on the unsheltered part is larger than the client's own working shows even where every argument succeeds.
