The Hindu Business Line : Trade jewellery for residential house

Assuming your investment in jewellery is more than 36 months old, it would make the grade as long-term capital assets. Under Section 54F, long-term capital gains from capital assets other than residential house qualifies for exemption from tax in the manner provided in the section if the proceeds or any part thereof are invested in a residential house within the prescribed time.

The prescribed time is within one year before or within two years after the date of transfer of jewellery if you want to purchase a residential house. In case you are contemplating construction of a residential house, you must complete construction before the expiry of three years from the date of such transfer. In case you are not able to do either of the things before the due date for filing income-tax return, don't despair — you can make use of Capital Gains Accounts Scheme 1988 operated by major nationalised banks and deposit therein the consideration not utilised for the above purpose.

But the amount so deposited must be used for the stated purpose — purchase or construction of a house within the prescribed time failing which it will become taxable as long-term capital gain as the income of the previous year in which the period of three years expires from the date of transfer of jewellery etc. And don't sell the house within three years because in that case not only will the house be subjected to short-term capital gains tax by reason of being a short-term asset at the time of sale but also the long-term capital gains from jewellery etc that was exempted earlier would now become taxable as long-term capital gain.

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