Yes, a 1031 exchange (also known as a like-kind exchange) is available in India, similar to the United States. Here’s how it works:
Capital Gains Tax Deferral: When a taxpayer sells a residential property in India, they have the option to defer the payment of capital gains taxes by entering into an exchange or transfer instead of a traditional sale. This is similar to the concept of a Section 1031 Exchange in the U.S.
Eligibility Criteria:
The taxpayer must either:
Construct a new residential property within three years after the sale of the original property, OR
Purchase a new residential property within one year before or two years after the sale of the original property.
The deferral is referred to as a deduction on the taxpayer’s tax return.
Capital Gains Deposit Account:
Any funds earmarked for the purchase or construction of the new property, but not yet spent, must be deposited into a
Capital Gains Deposit Accountin a nationalized bank within India.
The taxpayer must provide proof of the investment in new construction or the purchase of the new property when filing their tax return.
Time Frame:
The funds deposited into the Capital Gains Deposit Account must be used within the appropriate time frame, depending on whether the taxpayer is purchasing or constructing a new home.
Any remaining funds in the account after the specified time frame are subject to capital gains taxation.
Similar Deduction for Compulsory Acquisition:
A similar deduction/deferral of capital gains taxes is available in India for compulsory acquisition of land and buildings of industrial undertakings.
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Authors Of The Question
Is the 1031 exchange available in India?
mokshithbariki
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5 months
2024-05-27T10:34:33+00:00 2024-05-27T10:38:35+00:00Comment
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