Sell a piece of land in Ahmedabad and enjoy tax exemption via investment of an apartment in London, suggests Mukesh M. Patel in ‘Save Tax the Smart Way’ (www.taxmann.com). It may seem too good to believe, but it is true, he affirms. “With the Foreign Exchange Management Act (FEMA) having liberalised remittances by resident Indians for their annual overseas investments up to $2,00,000 and with the Income-tax Act enabling tax exemption of long-term capital gains (LTCG) in case of an investment made in either the purchase or construction of a residential house, you can now plan to sell your land in Ahmedabad and invest funds even in a London apartment so as to enjoy tax holiday,” reads the explanation.
Patel underlines that neither Section 54 nor 54F of the Income-tax Act prescribes any restriction in regard to the location where the investment in the residential house is required to be made. He cites the decision of the Mumbai ITAT (Income-tax Appellate Tribunal) in the case of Mrs Prema P. Shah vs ITO, that the language of Section 54 does not exclude the right of the taxpayer to claim exemption in respect of a residential property purchased in a foreign country, if all the other conditions laid down in the section are satisfied.
To those who are keen to invest more than $2,00,000 in their ‘dream home overseas,’ the author guides that, since the RBI limit is applicable per financial year, one can plan to invest before March 31, and then again in April.
Worth buying and, perhaps, trying!
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