Capital gain exemption u/s 54F

Mr. Bhahardwaj asked:
I am planning to purchase a new house for which I am going to sale gold which I have received as a gift from my grandmother which my grandmother purchased around 10 years back. What would be the legal consequences for the same.

Answer
For your easy understanding I have summarised the legal consequences in the following points.

1. The gift from your grandmother is exempt from tax.
2. When you sell the gold received from your grandmother, you will be chargeable to long term capital gains.
3. Thirdly if you invest whole of sale consideration in new house (which you need to do within 2 years) you will be eligible to exemption u/s 54F for whole of the capital gains.
4. Further there is a lock in period of three years which means you cannot sell that house within a period of three years.
   
5. If you do the exemption u/s 54F would be withdrawn and you will have to pay the capital gains tax on sale of gold.
6. Further its better that you show in your Income tax return the gift you have received and exemption u/s 54F to prevent further assessments.

In short you sell gold and purchase house and file the Income tax return as per point 6.