I have sold my house in my home town and have shifted to Bangalore. This was originally a residential house. I inherited part of it and paid money to other members to get ownership of the full property. One younger brother’s portion was bought in 2018 at commercial rates showing his portion of 350 sq. feet as commercial as he asked full money by cheques and the rates matched with commercial rates. On 26th August, 2021 the entire house was sold as residence cum commercial but the valuations paid for by buyers for whole area was calculated much more than circle rate applicable for residential property and was computed on commercial rates. The house was never given on rent and never any business activity was performed. My problem is this, I am 70 years and if I invest the whole amount in a residential house, to claim capital gains exemption in a residential house then what will happen in case of medical emergency. Please guide.
In respect of long-term capital gains on sale of any capital asset you are eligible to claim exemption if you invest if you invest for buying a residential house. The quantum of amount which you are required to invest differs depending on whether the asset sold is a residential house or a capital asset other than a residential house including commercial property. In order to claim exemption from long-term capital gains on sale of a residential house property, you are required to invest only the amount of capital gains and that too after availing the benefit of indexation. In contrast, for availing long term capital gains exemption in respect of a commercial property you have to invest whole of the sale consideration in a residential house. So if the property sold is residential one, the amount of investment one has to make is significantly lower than what is required to be invested in the case of the sale of a commercial property.
In order to determine whether a property is to be treated as commercial or residential the fact that it was never used for business or it was never let out are not relevant