Article Explains Exemption / Deduction under Section 54, Section 54EC & Section 54F of Income Tax Act, 1961 with FAQs and Case Laws. It explains regarding Capital Gain Account Scheme, deduction on multiple sales & purchases of residential houses, capital gains arising from sale of more than one house, however the sale proceeds are invested in one house, exemption under section 54 / Section 54F / Section 54EC for acquisition of more than one house, exemption under section 54 / Section 54F / Section 54EC for property purchased in the joint name with wife, exemption for purchase of property our of personal funds and on many more issues.
Some Practical Issues
Q. What is Capital Gain Account Scheme?
If the new asset is not acquired up to the date of submission of return of income, then the tax payers will have to deposit money in “Capital Gain Deposit scheme” with a nationalized bank. On the basis of actual investment and the amount deposited in the deposit account, exemption will be given to the tax payer.The details of amount deposited should be given in the return itself.
Q. Is the relief under section 54 is available to multiple sales & purchases of residential houses?
In case of multiple sale and purchase of residential houses, the exemption cannot be calculated considering the aggregate of capital gain and aggregate of investment in the residential houses. The exemption will be available in relation to each set of sale and corresponding investment in the residential house and the combination which is beneficial to the assessee has to be allowed. [Rajesh Keshav Pillai v. ITO 7 Taxmann.com 11 (Mum.) (2010)]
Q. Whether deduction u/s 54 is available for capital gains arising from sale of more than one house, however the sale proceeds are invested in one house?
There is no restriction placed in section 54 which restricts exemption only in respect of sale of one residential house. Even if assessee sells more than one house in the same year and the capital gains is invested in a new residential house, the claim of exemption cannot be denied if other conditions are fulfilled. [DCIT v. Ranjit Vithaldas [2012] 23 taxmann. com 226 (ITAT-Mum)]
Q. Can assessee claim exemption under section 54 for acquisition of more than one house?
- Where more than one residential house is purchased out of the sale proceeds of one residential house, exemption u/s 54 can be claimed only in respect of one house, provided the other conditions of Sec 54 are satisfied.[K.C. Kaushik v ITO 185 ITR 499 (Bom.)(1990)].
In Gulshanbanoo R. Mukhi v. JCIT 83 ITD 649 (ITAT- Mum) (2002),it was held that exemption is allowed only for one flat.
However, two or more residential houses purchased can be classified as one single residential house, the exemption under section 54 can be allowed. Some of the relevant judicial pronouncements are:
- Two adjacent residential units but used as one single residential house, exemption allowed. [D. Anand Basappa v. ITO 309 ITR 329 (Kar.) (2009)]
- Fact that residential house consists of several independent units cannot be a hindrance to allowance of exemption u/s 54 – Held, yes [Prem Prakash Bhutani Vs. CIT 110 TTJ (Del) 440 (2007)]
- Two adjoining flats converted into single residence, exemption allowed. [ACIT v Mrs. Leela P. Nanda 286 ITR (AT) 113 (Mum) (2006)]
- Four flats purchased in same building but on different floors because of large size of family, which maintained a common kitchen and a common ration card, exemption allowed. [Vyas (K.G.) v ITO 16 ITD 195 (Bom.)(1986)]
- Allowable in the case of adjacent & contiguous flats.[ITOv. Mrs. Sushila M. Jhaveri 107 ITD 327 (ITAT- Mum. SB)(2007)]
- Several self occupied dwelling units which were contiguous and situated in the same compound and within the common boundary having unity of structure should be regarded as one residential house. [Shiv Narain Choudhary v. CWT 108 ITR 104 (All)(1 997)]
- More than one units converted into one single house allowed for the purpose of sec. 54F as well. [Neville J. Pereira v. ITO 8 Taxmann. com 68 (Mum. ITAT) (2010)]
- Two flats which were not adjacent to each other and were separated from each other by common passage, lobby, staircase, etc., they could not be regarded as a single unit and, therefore, assessee was entitled to benefit of deduction under section 54F in respect of one of those two units. [ACIT vs Sudhakar Ram [2011] 16 taxmann.com 175 (Mum.-ITAT)]
- However, the claim for exemption u/s 54 is not admissible in respect of two independent residential houses situated at different locations. [Pawan Arya v. CIT 11 taxmann.com 312 (P&H) [2011]]
Q. Whether the property purchased in the joint name with wife is eligible for exemption u/s 54/54F?
Section 54F mandates that house should be purchased by assessee and it does not stipulate that house should be purchased in name of assessee. Property purchased by assessee in joint name with his wife for ‘shagun’ purpose because of fact that assessee was physically handicapped and the whole consideration was paid by assessee, assessee entitled to exemption u/s 54F. [CIT Vs Ravinder Kumar Arora 15 taxmann.com 307 (Delhi) [2011])]
Other relevant judicial pronouncements
ü Merely because sale deed is in joint name, assessee could not be denied benefit of deduction u/s 54. [DIT v. Mrs. Jennifer Bhide 15 taxmann.com 82 (Kar.) [2011]]
ü House property in the name of HUF sold but new house purchased in the name of Karta and his mother to claim the benefit of sec. 54F. The residential house which is purchased or constructed has to be of the same assessee. [Vipin Malik (HUF) Vs CIT 183 Taxman 296 (Delhi) (2009)]
ü Exemption u/s 54F is allowed only when the new residential property is purchased by the assessee in his own name and not in name of his adopted son. [Prakash v. ITO 173 Taxman 311 (Bom.) [2008]]
ü Sec. 54 clearly says that if the assessee is owner of the property, he is entitled to exemption even if the new property purchased is in the name of his wife but the same is assessed in the hands of the assessee. [CIT v. V. Natarajan 154 Taxman 399 (Mad.) [2006]]
Q. Whether the nexus between capital gain and amount of investment u/s 54 is necessary?
Assessee is not required under the provision for section 54 to establish the nexus between the amount of capital gain and the cost of new asset.
Held that the assessee had initially utilized the sale proceeds on sale of its residential flat in commercial properties and, later on, he purchased two residential flats within a period specified in sub-section (2) of section 54. The Revenue’s main dispute was that the sale proceeds were utilized for purchase of a commercial property and residential house was purchased out of the funds obtained from different sources, as such, the identity of heads has been changed. [Ishar Singh Chawla Vs. CIT 130 TTJ (Mum) (UO) 108 (2010) and Ajit Naswanit Vs. CIT 1127 Taxman 123 (Delhi) (Mag.) (2001)]
Q. To avail exemption u/s 54F, the residential property should be acquired out of personal funds or sale proceeds?
If the assessee constructs or purchases a residential house out of the borrowed funds, he is not eligible for deduction u/s 54F of the Act. If it is not construed in such a manner the object of introduction of the beneficial provisions would be frustrated. The fiscal provisions are to be construed in such a manner, so that its objects of introduction can be achieved. [Milan Sharad Ruparel 005 ITR 0570 (ITAT – Mum) [2010].
However a different view was taken in Bombay Housing Corporation v. Asst. CIT 81 ITD 545 (Bom.-ITAT) (2002), Where assessee utilized the sale consideration for other purposes and borrowed the money for the purpose of purchasing the residential house property to claim exemption under section 54,it was held that the contention that the same amount should have been utilized for the acquisition of new asset could not be accepted.
Other relevant judicial pronouncement:
There is no requirement for claiming exemption under section 54 that same amount of sale consideration should be utilized for acquisition of property, even borrowed funds can be utilized for that purpose. [Prema P. Shah Vs ITO 101 TTJ 849 (Mum-ITAT)(2006)]. Also see J.V. Krishna Raovs DCIT [2012] 24 taxmann.com 104 (Hyd.-ITAT).
Q. Whether exemption under section 54 is allowable if residential units of a house property are purchased from different persons?
Execution of four different sale deeds in respect of four different portions of property did not materially effect nature of transaction or nature of property acquired since property in question was being used by assessee for her own purposes and investment made in purchase of same was, therefore, eligible for deduction under section 54.[CIT V. Sunita Aggarwal (2006) 284 ITR 20(Del)]
In CIT vs Smt. Jyothi K. Mehta [2011] 12 taxmann.com 440 (Kar.), it was also held that the fact that the assessee could not have purchased both the flats in one single sale deed or could not have narrated the purchase of two premises as one unit in the sale deed could not make any difference. The two flats purchased were situated side by side. Builder also stated that he had effected modifications to the flats to make them one unit by opening the door in between the two apartments.
Q Whether exemption u/s 54 can be claimed on the basis of a mud structure?
Exemption u/s 54 cannot be allowed for sale of a mud structure whereupon there was never any structure fitting to be described as “habitable residential house”. [M.B. Ramesh vs ITO 320 ITR 451 (Kar.) [2010]]
Q Whether benefit u/s 54(1) is available in case of sale of land adjoining to the building?
The land appurtenant to the building means that the ownership of building and land appurtenant should be of same person. If building is owned by one person and land is owned by another, it will be the case of land adjoining to the building and by no stretch of imagination it can be called land appurtenant to the said building and therefore, benefit of section 54(1) would not be available to such land adjoining to a building. [P.K. Lahri v. CIT 146 Taxman 349 (ALL.)(2005)]
Q Is it necessary that a person should reside in the house to call it a residential house.
The popular meaning of words ‘residential house’ is a place or building used for habitation of people. It is not necessary that a person should reside in a house to call it a residential house. If it is capable of being used for the purpose of residence than the requirement of the section 54F is satisfied and benefit could not be denied. [Amit Gupta v. DCIT 6 SOT 403 (Delhi)(2006) & Mahavir Prasad Gupta 5 SOT 353 (Del)(2006)]
Q Can the assessee claim exemption under section 54 in respect of investment in modification or renovation of the existing house?
Exemption is available only when the investment is in the consideration of a house and not for investment in modification or renovation. Admitted facts are that the assessee had a fairly big house to which the assessee made addition of 140 sq. meters of plinth area. However, it is the conceded position that the assessee has not constructed any separate apartment or house. Section 54F does not provide for exemption on investment in renovation or modification of an existing house. On the other hand, construction of a house only qualifies for exemption on the investment. Even addition of a floor of a self contained type to the existing house would have qualified for exemption. However, since the assessee has only made addition to the plinth area, which is in the form of modification of an existing house, she is not entitled to deduction claimed u/s 54F of the Act. [Mrs. Meera Jacob vs ITO 313 ITR 411 (Kerala) (date of order 9/06/2008)]
Q Whether exemption under section 54 is allowable for addition of floor to the existing house from the sale proceeds of residential house sold?
Assessee owned two residential houses. He sold one house and utilized its sale proceeds to construct first floor on his second house after demolishing old structure, in this case exemption will be allowable under section 54. [CIT vs P.V. Narsimhan [1989] 47 Taxman 89 (Mad.)
However, in CIT v. V. Pradeep Kumar [2007] 290 ITR 90/ [2006] 153 Taxman 138 (Mad.), it was held that a mere extension of existing building would not give benefit to assessee under section 54F. Section 54F emphasizes construction of residential house and such construction must be real one and should not be a symbolic construction. Followed by ACIT vs T.N. Gopal [2009] 121 ITD 352 (Chennai-ITAT) (TM)
Q Whether the expenditure to make a residential house habitable will be included in the cost of new asset?
The words used about the amount spent on purchase of new asset are ‘cost thereto’ and not ‘price thereto’. The cost includes purchase as well. Consequently, the words used signify that the amount of purchase will include other necessary expenditure in this behalf to make a residential house habitable and taken together that will be the cost of the new asset. The Tribunal had perused the items of the report of the architect. The residential house was in a state of general disrepair and was inhabitable. Consequently, the necessary repairs carried out to make the same habitable would constitute part of the cost of new house. [Gulshanbanoo R. Mukhi v. JCIT 83 ITD 649 (ITAT- Mum) (2002)]
Q Whether exemption under section 54F would be allowable where assessee is already a co-owner of another flat?
The word ‘own’ appearing in section 54F includes only such residential house which is fully and wholly owned by one person and not a residential house owned by more than one person. The assessee was already a co-owner of another flat. Being a co-owner, assessee was not the absolute owner of another residential flat, and exemption under section 54F could be denied on this ground. [ITO vs Rasiklal N. Satra [2006] 98 ITD 335 (Mum.-ITAT)]
Q Whether determination of title to the property would commence from the first date of allotment or the subsequent date of allotment of the actual flat number and delivery of possession for the purpose of assessing long term capital gains.
Title to the property is transferred with the issuance of the allotment letter and payment of installments is only a follow up action and taking of the delivery of possession is only a formality. [Vinod Kumar Jain Vs CIT TIOL706-P&H (2010)]
Q Whether exemption under section 54 would be allowable where residential house property is purchased within time limit specified under section 139(4)?
The due date for furnishing return of income as per section 139(1) is subject to extended period provided under sub-section (4) of section 139 and, if a person had not furnished return of previous year within time allowed under sub-section (1), assessee could file return under subsection (4) before expiry of one year from end of relevant assessment year. Therefore, section 54 deduction could not be denied to assessee on this count. [CIT v. Ms. Jagriti Aggarwal 15 taxmann.com 146 (P & H) (2011)]. Also see ITO vs Smt. Sapana Dimri [2012] 19 taxmann.com 15 (Delhi), Kishore H. Galaiyavs ITO [2012] 24 taxmann.com 11 (Mum.)
Q Is there any requirement that the assessee should file the return before the due date under section 139(1) to claim exemption under section 54/54F?
Where the assessee had fulfilled the condition for depositing the amount of capital gain in a specified bank account before the due date prescribed for furnishing the return of income under section 139(1),there is no requirement that the assessee should file her return of income before the due date prescribed under section 139(1). [Esther Christopher Mascarenhas v. ITO 9 Taxmann.com 99 (Mum.-ITAT) (2011)]
Merely because investment is made after due date of filing of return, section 54F exemption cannot be denied where investment is made prior to filing of return under section 139(4). [R.K.P. Elayarajan vs DCIT [2012] 23 taxmann.com 206 (Chennai-ITAT)]
Q Whether property purchased in foreign country is also eligible for exemption u/s 54?
Section 54 does not exclude the right of the assessee to claim property purchased in a foreign country, if all other conditions laid down in the section are satisfied. Merely because the property acquired was in a foreign country, the exemption under section 54 cannot be denied.The new house may be in India or outside India. [Prema P. Shah Vs. ITO 101 TTJ 849 (Mum-ITAT)(2006)]
However, in Leena J. Shah vs ACIT [2006] 6 SOT 721 (Ahd.-ITAT), it was held that the benefit under section 54F is not allowable for a residential house purchased/ constructed outside India.
Q Whether cost of residential house includes the cost of plot?
The cost of the plot together with cost of the building will be considered as cost of new asset provided the acquisition of the plot and also the construction thereon are completed within the period specified in these sections. [Circular no. 667, dated 18-1 0-1 993]
Q Whether the deemed cost of new asset means the amount which has already been utilized by assessee for purchase or construction of new asset or it also includes the amount deposited as per requirements of sub-section (4) of section 54F?
For purposes of sec 54F, deemed cost of new asset is amount which has already been utilized by assessee for purchase or construction of new asset plus amount deposited as per Capital gain account scheme, 1988. [ACIT v. Vikas Singh 16 taxmann.com 127 (Delhi) [2011]]
Q Whether booking of flat with a builder amounts to construction or purchase?
Booking of flat with a builder is a case of construction and not purchase of residential flat and therefore, time period 3 years is applicable. [Kishore H. Galaiyavs ITO [2012] 24 taxmann.com 11 (Mum.)]
Q Is allotment of flat under self-financing scheme treated as construction or purchase of a house?
Under Government schedules confining to two years’ period for construction and handing over possession thereof is impossible and unworkable under section 54 and, thus, if substantial investment is made in construction of house, it should be deemed that sufficient steps have been taken satisfying requirement of section 54 [Smt. Shashi Varma vs CIT [1997] 224 ITR 106 (MP)]
Q Whether deduction under section 54 be available where builder have not even allotted the plot within 3 years?
The main thrust of the section 54F is construction of a residential house; the Legislation in its wisdom has specifically provided the period of three years, it cannot be enlarged to indefinite period for the reason that no construction activity could be started within a period of 3 years by the builder because of which no plot was ever handed over to the assessee. [Pankaj Wadhwani vs CIT 18 Taxmann.com 33 (Indore- ITAT)[2012]]
Q Whether for purpose of claiming exemption under section 54, possession of flat booked with builder had to be taken within the time period specified?
If the assessee had made investment within period of three years, exemption under section 54 could not be denied for the reason that possession had not been taken. There may be delay in taking of possession because of many factors not under control of assessee, merely because of this exemption could not be denied. [Kishore H. Galaiyavs ITO [2012] 24 taxmann.com 11 (Mum.)]
In CIT vs R.L Sood [2000] 108 Taxman 227 (Delhi), it was held that on payment of substantial amount in terms of purchase agreement within four days of sale of his old house, assessee acquired substantial domain over new residential flat within specified period, it could be said that assessee complied with requirements of section 54. Merely because builder failed to hand over possession of flat within specified period, assessee could be denied benefit of benevolent provision of section 54.
Q Does exchange of old flat with a new flat under a development agreement amounts to construction of new flat for purpose of claiming deduction under section 54?
Exchange of old flat with a new flat to be constructed by the builder under development agreement amounts to transfer under section 2(47) of the Income Tax Act, 1961. The acquisition of a new flat under a development agreement in exchange of the old flat amounts to construction of new flat. The provisions of section 54 are applicable and assessee is entitled to exemption if the new flat had been constructed within a period of 3 years from the date of transfer. [Jatinder Kumar Madan vs ITO [2012] 21 taxmann.com 316 (Mum.)]
Q Can deduction u/s 54 be claimed for purchase of a share in the residential house property where the assessee presently resides?
Section 54 nowhere states that a residential house which is purchased by an assessee so as to enable the assessee to get exemption under the provisions of section 54 should not be the one in which the assessee was residing. Merely because the assessee was residing in a residential house which was purchased by her, exemption under section 54 could not be denied. [CIT vs Chandan Ben Magan Lal 245 ITR 182 (Guj) (2000)]. Also see CIT vs TN Arvinda Reddy 120 ITR 46 (SC) (1979), ITO vs RasikLal N Satra 98 ITD 335 (Mum) (2006)]
Q Whether transfer of only interest in flats under construction could be treated as transfer of residential house?
Where the assessee transferred only his interests in two flats under construction of which possession was not taken and was not fit for human habitation, such transfer could not be treated as transfer of residential house. Hence, the capital gain derived by the assessee related to a capital asset held by him for a period of more than 36 months and, therefore, the gain arising from the transfer of his rights in the said flats constituted longterm capital gains. The assessee would, therefore, be entitled to grant of exemption under section 54F. [Jagdish Chander Malhotra v ITO (1998) 64 ITD 251 (Del)]
Q Whether the assessee is entitled to deduction under section 54F for purchase of flat under construction before the expiry of statutory period of two years from the date of the capital gain?
Where assessee invested amount of capital gain on sale of shares in purchase of flat before expiry of statutory period, benefit of deduction under section 54F could not be denied to assessee on ground that building was under construction stage and assessee had chosen to pay entire advance. [ACIT vs Sudhakar Ram [2011] 16 taxmann.com 175 (Mum.-ITAT)]
Section 54F does not prescribe completion of construction of residential house and thrust of said section is on investment of net consideration received on sale of original asset and start of construction of a new residential house. [Smt. Rajneet Sandhu vs DCIT [2011] 16 taxmann.com 210 (Chd.-ITAT)]
Q Can construction of house property start before the date of transfer.
Exemption on capital gains under section 54 cannot be refused merely on ground that construction of new house had begun before sale of old house.[CIT v. HK Kapoor 150 CTR 128 (All) (1998)]
Q Can the assessee simultaneously take benefit of both purchase and construction of residential house property?
If an assessee is entitled to relief on fulfillment of either of the two conditions specified under section 54, i.e., either purchasing a house property within one year or constructing the house within two years, it would be improper to read that on fulfillment of both the conditions, he would be disentitled to that relief. Section 54 does not contemplate two kinds of relief; it only contemplates fulfillment of two alternative conditions. If both the conditions are satisfied within the time stipulated, the assessee does not become disentitled to the relief if the other conditions are fulfilled. If a floor is constructed to the new house or if it is renovated it remains as one house only, especially when there is no evidence that two different houses bearing two different municipal numbers were constructed. Therefore, benefit can be availed jointly. [BB Sarkar v. CIT 132 ITR 150 (Cal)(1 981)].
Q Where the minor has transferred an asset, will the exemption under section 54F/54EC be allowed to the minor or the parent.
Provisions of section 64(1A) i.e. clubbing of income of the minor with the income of the parent have to applied in the end after computing income of minor under Income Tax Act.
Where proceedings under Act for assessment of income of a minor child are required to be taken, minor child can be treated as an assessee under section 2(7) for purposes of section 54F. Benefit under section 54F cannot be denied to minor child on ground that father of minor child has a residential house at time of transfer of capital asset. [ACIT vs Madan Lal Bassi [2004] 88 ITD 557 (CHD.)]
In case of clubbing of income of minor child, deduction under section 54EC is to be allowed on minors’ income from LTCG separately and only net income is to be clubbed [DCIT vs Rajeev Goyal [2012] 22 taxmann. com 34 (Kol.-ITAT)]
Q What is the date of investment in respect of section 54EC?
For the purposes of the provisions of Section 54EC, the date of investment by assessee must be regarded as date on which payment was made and received by the National Housing Bank. [Hindustan Unilever Ltd. v. DCIT 191 Taxman 119 (Bom) [2010]]
Q Whether the benefit under section 54EC could be availed where bonds are purchased in joint name?
Merely because bonds are in joint name, assessee could not be denied benefit of deduction u/s 54EC. As far as it is established that the complete consideration has flown from the assesse, the benefit could not be denied on this ground. [DIT vs Mrs. Jennifer Bhide 15 taxmann.com 82 (Kar.) [2011]]
Q Can exemption under Section 54EC be claimed where REC Bond were purchased prior to date of sale of property?
Section 54EC clearly states that the investment in specified bonds is to be made “within a period 6 months after the date of such transfer”, the intention of the legislature is clear. Had the legislature wanted to give liberty to the assessee to invest before or after the date of transfer, they would have explicitly said so, as has been provided in section 54 & 54F of the Act. Since such specific words are not used in section 54EC, deduction cannot be allowed to the assessee. [Smt. Dakshaben R. Patel vs ACIT [2012] 22 taxmann.com 237 (Ahd.-ITAT)]
Q Is exemption u/s 54EC is available from capital gains on deemed transfer u/s 4 6(2) of the Income Tax Act 1961?
Capital Gains in the hands of shareholder on distribution of assets by company in liquidation u/s 46(2) is a deemed transfer not an actual transfer which has specifically been taxed under that section. Exemption u/s 54EC is available from gains on actual transfer and not from gains u/s 46(2).[CIT V. Ruby Trading Co. Ltd. 32 Taxman 500 (Raj) [1987] ]
Q Whether the benefit under section 54EC and 54F can be taken simultaneously?
Deduction under section 54EC cannot be denied on ground that assessee has availed exemption under section 54F also in respect of a part of capital gains. [ACIT vs Deepak S. Bheda[2012] 23 taxmann.com 159 (Mum.)]
Q Whether the benefits u/s 54, 54F & 54EC are available from gains of depreciable capital asset?
In CIT V. Assam Petroleum Industries Pvt. Ltd. 131 Taxman 699 (GAU.) [2003], it was held that, where a depreciable asset is held for more than 36 months before its transfer, then such depreciable capital asset is Long Term Capital Asset. However, according to section 50(1)&50(2), the gains or loss on DCA shall always be short term.
It was further held that benefit u/s 54,54F & 54EC which are available from gains of a LTCA shall be available from gains of Depreciable capital asset.
EXEMPTIONS SECTION 54, 54EC & 54F OF INCOME TAX ACT, 1961
The assessee can claim exemption from capital gains on sale of residential house property under the following sections:
| Particulars | Sec. 54 | Sec. 54EC | Sec. 54F |
| Exemption claimed | Individual/ HUF | Any person | Individual/ HUF |
| POH of Capital asset | Long-Term | Long-Term | Long-Term |
| Eligible specific asset | A residential house property | Any LTC asset. However wef A.y 2019-20 it should be land or building or both. | Any LTC asset (other than a residential house property)provided on the date of transfer the tax payer do not own more than one residential house property from the A.Y. 2001-02 (except the new house as stated in 4 infra).
The Assesee Should either Purchase or Construct only one House within the specified time period. Also, the Assessee should not have more than one house in his name at the time of transfer of original asset income from which is charged under the head Income from house property |
| Type of asset should be acquire to get the benefit of exemption | One Residential house property in India | Long Term Specified Asset, that is, Bonds of national highway authority of India or Rural Electrification Corporation.
Wef Assessment Year 2018-19 investment in any bonds redeemable after three years shall be eligible for exemption. Wef A.y 2019-20 investment in any bonds redeemable after five years shall be eligible for exemption |
One residential Property in India |
| Time limit for acquiring the asset | Purchase:1 yr backward or 2 yrs forward. Construction:3yrs forward | Six Months from the date of transfer. | Purchase:1yr backward or 2yrs forward.Construction: 3yrs forward |
| Relevant date for acquiring the new asset | From the date of transfer of house property but in case of compulsory acquisition from the date of compensation. | From the date of transfer of long term capital asset but in the case of compulsory acquisition from the date of receipt of compensation. | From the date of transfer of capital asset but in case of compulsory acquisition from the date of receipt of |
| Amount exempted | Investment in the new asset or capital gain, whichever is lower. | Investment in the new asset or capital gain, whichever is lower. | Amount of Exemption shall be equal to Capital Gains ÷Net Consideration ×Amount of Investment |
| Exemption revoke in a subsequent year | If the new asset is transferred within 3 yrs of its acquisition. | The Asset so purchased should not be transferred before 3 years (5 years if the investment in specified asset is made on or after 01.04.2018 ). | a) If the new asset is transferred within 3 yrs of its acquisition.
b) if the assessee purchases, within the period of two years after the date of the transfer of the original asset, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head “Income from house property”, other than the new asset, |
| Different questions | Sec. 54 | Sec. 54EC | Sec. 54F |
| When the exemption is revoked it is taxable as LTCG/STCG in the year in which the default is committed. | STCG | LTCG | LTCG |
| Scheme of deposit is applicable | Yes | No | Yes |
Also Read:
All about Section 54, 54B, 54D, 54F, 54GA, 54EC, 54G & 54GB
(Source – Book on Practical Aspects of Tax Audit, TDS, HUF & Capital Gains written by CA Agarwal Sanjay ‘Voice of CA’ & Team)
(Republished With Amendments)
Hi,
Suppose a person sells a property (urban land) and kept part of capital gain money in capital gain scheme and in subsequent year sells one more property (urban land) and invests both in a residential property in the year in which he sells the second property, can he claim exemption under section 54F.
I had purchase a flat (Under construction) on month of October 14 by LIC home loan.Property is the name of my wife (1st name) and my.My mother in law. had given us 5 lakh to her girl (my wife) in our joint a/c (Me and wife).Now iam going to sell my old flat within 2 to 3 month and invest the same to my new flat and return the 5 lakh to my mother in law.(Total valu of flat approximate 13 lakh,I had purchased the same 7 years ago.) and rest of invest in new flat.So please suggest what I will do? This capital gain is taxable or not?IF I return back 5 lakh to moter in law is this taxable? What we had receive 5 lakh to our joint A/C ,Is this money taxable or not?
sir i have purshase flat in year 9-01-2013 &i have sold my industrial gala on dated 22-03-2015 can iclaim long term catital gain tax or as per incometax rules exempted
a ancestral property (now in name of my father) is sold and sale consideration of Rs. 27 lacs.LTCG approx amount to Rs. 9 lacs as per calculation done by my CA. now i am planning to Construct a house on two adjoining plot – one of which is in the name of my mother and another in my name(son). so whether the LTCG amount of 9 lacs can be shown as joint contribution by my father and claim exemption under section 54.Total construction cost of house is estimated to Rs. 32 lacs of which 9 lacs from father as joint contribution, 20 lac housing loan and balance Rs. 3lacs by me/mother.
kindly guide,
Thanking you
DEAR SIR
I have purchased new flat by arranging loan and own funds.My paraents sale the agri land and we ultilise the same amount to purchase new flat in the name of me and my wife.
wether capital gain tax is to be paid by my paraents if applicable or there is exemption availbale.
Please provide your expert opinion.
Thanking you
Dear Experts,
I have a query. I am selling a trust property whose beneficiaries are all the members of my family. And i am planning to buy a Leasehold property (Having 999 years Lease rights) out of the Gains from the sale of the property.
I have two queries:
1. What is the income tax law for selling of trust property and beneficiaries getting the fund.
2. If i invest my share in a leasehold residential property would i be allowed to the capital gain exemption?
Thank you in advance.
suppose a land(not used for agriculture or business purpose earlier) aquired by govt under compulsary aquisition,and the assessee invested the amount for purchasing a land after one year from date of transfer,can we deduct the amount invested in new land from the net consideration(after applying indexation)?
if we can under which section?
Hello Sir,
My uncle has invested in NHAI bond a year back and he recently passed away. My aunty is the nominee for the Bond. Now can the nominee close the bond or is it mandatory to transfer the bond to nominee according to income tax rules. Please advice.
Many Thanks,
Saravanan
i have my own land , i made joint venture with x party, ratio between us is 50% : 50%, on 11.10.2012, in that we mention that whatever the amount is received by joint venture half of amount is give to me, but still now he only gave me rs.10 lacs. Now i want one suggestion that is how can i reduce my tax liability ?
Hello Sir, suppose a person has sold a property and reinvested the money in new property in the same year and claimed exemption u/s 54, due to unavoidable reasons he has to sell the new property bought with in 3 years and reinvested the amount in the purchase of new property, will capital gain be attracted which he had claimed exemption u/s 54.
Hi Sir,
If a residential house property is sold in the financial year 2014-15 and the amount is invested in the eligible investments under section 54 immediately and claimed income tax exemption there under. Now lets assume that the time limit for investment u/s 54 expires on 30.06.2017 i.e. 3 years from date of sale of original property. Now it is found that the part of amount which is taken earlier as exemption u/s 54 in the year 14-15 is ineligible on 30.06.2017.
Now can any one please give me clarification regarding the taxablity of the amount defaulted. my doubt is whether the amount of default is treated as capital gains for the f.y 2014-15 or f.y 2017-18
bought residential property to offset capital gains.but got delayed in constructing within time limit of three yrs.
Hi.
I have sold a residential flat during May 2014, and receive a capital gain of 13lac approx(long term gain).
During next month with that payment plus savings i have made a part payment of existing home loan on another flat. The total outstanding was 46.6lac and repayment done was 26.6 lac(approx).
now please tell me whether i have to reinvest this capital gain in to another property or repayment of exsisiting loan shall be considered as investment.
also please inform about the time duration for reinvestment of capital gain.
Thanks
Hi, can tax benefit under 54F be claimed if the property is purchased jointly with some friend ?
Hai this is sudheer,
Will the Sec 54F Exemption revokes if the assessee changes the residential property into a commercial property in 6 months of purchase of residential flat??
I sold a flat and want to construct my old parental house by demolishing it completely and will make the new one. Parental house is registered in the name of Parents. Is exemption under Section 54 applicable or i need to transfer the parental house on my name and then construct ?
Dear Sir, I Sold a residential plot and purchased a Industrial shed and leased. Whether I can claim Long Term Capital Gain Exemption ? Please reply.
Thanks
Suppose a person buys a Residental house on 01/03/2015 with the help of housing loan and take possession of house. Within next one year (on or before 28/2/2016), he disposes off his old Residental house and repay housing Loan before 28/2/2016, Is he eligible for expemtion u/s 54. Kindly advise me on s.pote@uti.co.in
A father solan agricultural land on his name and invested it and after some time he wants to purchase a residential house under section 54F. Weather he can claim an exemption under 54F section of the act?? I want in favour of this claim…..
Do an assessee required to file ITR if he has solely a capital gain which is totally exempted by virtue of any sub section under section 54 and thereby no taxable income and also assuming no TDS to claim….. There is no other heads of taxable income at all…
Sir, I purchases a residential house in December 2010 and constr u tend a house demolishing old house which construction was completed in the fourth week of May 2012. Mean while, I sold my land (which was marked by the government as residential area) and the sale was registered in the first week of May 2013. Also I purchased a residential site (vacant land with corporation VLT) in 2013 July. Am I eligible for the exemption for the construction of the house and for purchase of house site(vacant land). Please enlighten me.
If Someone have Long Term Capital Gain on Sale of Urban agriculture land, can he claim exemption under Section 54EC or 54F? or he has to claim exemption under 54B only i.e. exemption on sale of Urban Agriculture land.
Sir power of attorney of a piece of land is transferred to my grandfather’s name by a person with whom my grandfather does not have a blood relation. So it will be treated as gift
If he sells that land then what is the amount that will be taxable? And what if he invests the amount for purchasing residential property. The amount that he will receive by sale of that land is around 1 crore. Please suggest me in what way the amount is to be utilized. He already holds one residential house property in his name
Sir, I had bought a flat in 1996. The allotment was in my name. But the possession letter was issued in joint names with my wife. Now in feb.2015 I have sold this flat. Am i liable for capital tax gains if I have bought a new under construction flat last year in 3/2014 in the name of my son and wife. A home loan was sanctioned by hdfc considering the clubbed income of my son and myself. At present me and my son are paying the installments at 50 % . So am liable to pay capital gain tax as the new property has been bought in the names of my son and wife. Kindly reply and help me out. Thanks, with regards, George.
Father sells urban agricultural land in ay 2011-12 to builder and invests in only son name in rural agricultural land can claim rebate u/s 54F. Plz advise.
Dear Sir,
An assesse sold one residential property at a town and buying a residential property along with his son at city to live with his son. Both father and son do not have any other residential property. Whether deduction under section 54 will be denied?
can an single party avail all long term capital gain in his own name if property is in the name of two party.
One our Customer to Sold out the Property House (Purchase in F.y.04/05 -Rs.250000) Rs. 785000 in oct. 2013 and purchase a new house in Sept.2014. He can avail the benefit of U/s 54. He is not invested in Capital Gain Scheme before income Tax due date Return…now what procedure the rebate u/s 54.
I want to sale my house which I have made in year 2011 and the land for the same was purchase in year 2000. Buyer want to pay me the cost of house (Rs.65 Lacs) after deduction of income tax @1% saying it is legal requirement. I will buy residential plot and construct house thereafter using this money.
kindly guide me about income tax rules for the same.
Hi, suppose a person has sold a property and reinvested the money in new property in the same year and claimed exemption u/s 54, due to unavoidable reasons he has to sell the new property bought with in 3 years and reinvested the amount in the purchase of new property, will capital gain be attracted which he had claimed exemption u/s 54.
Dear Sir,
I have a deposit in the CGIS with idbi bank since one year. If I am unable to buy any property within two years of the sale of my house am I liable to pay tax?
How long can I keep the money there?
Dear Sir , My Father had sold a house 07 years old constructed ,and shifted to mumbai with me due to old age , he was paying propoerty tax from 2007 , now no bills afre availbale for construction done ,
House was constructed on goverment plot acquired in 2000 having registration on his name and subsiquently house was built on it , Retired person .
please giude on income tax on capital gain . Thanks in advance for the reply . Best Regards
I have already one house site, I will purchase another house site so I sold my own Gold Jewellery. Will I affect Capital Gain for sale of gold jewellery?
hi, i have earned a LTCG ..can the same be used to pay up loan on the existing property,Flat and making up habitable that is the interiors and also the gains were used to repay the loan amt of the sold property, will that be factored anywhere.
can we purchase an addl 500 sq yd plot for residential purpose other than a Flat and claim deduction along with above u/s 54
regds
I am getting LTCG from sale of Commercial property. I intend to purchase joint owner’s (wife) share in a residential property purchased in 2012 but installments pending. Can this be treated as investment of residential house u/s 54F.
Sir,
I have sold a plot for 40.00 lacs which was purchased by me for 1.25 lacs in 2006. I have bought a new residential house for 56 lacs by investing the sale proceeds. I have also taken a housing loan from bank of Rs. 54.00 lacs for financing the balance amount and for making furniture and fixture in the new flat.
So i will take deduction under Sec 54F of Capital arising out of sale of plot.
Now I am also selling my old flat in which i was residing. That flat was purchased by me in 2002 for 5.00 lacs. I will get sale proceeds of Rs. 30..00 Lacs on sale of this old flat. This flat is on joint name with my wife.
Can i use this capital gain for repaying my housing loan and claim deduction under sec 54
Plz clarify.
Dear Sir
I have a query related to sec 54F. I have sold shares in a Pvt Ltd company in April 2013 (purchased more than 3 years before ). I want to utilise the capital gain in the construction of a residential house. I was allotted the land by a builder in March 2011 and the registery and possession was done in March 2013 . I will now construct a house on this land . Can I get the benefit of the amount paid to purchase the land also along with the cost of construction of the house(since the registry is within one year before of the transfer of the shares.
Dear Sir
I intend to sell my flat and jointly purchase with my sister an old house to live in as a joint family. What are the benefits that we get? Is there no tax exemption under capital gains for purchase of an old property and is it only that we get the benefit if we purchase a NEW HOUSE or NDER CONSTRUCTION HOUSE?
Hi,
I invested in a flat in 2001. But due to some disputes the possession of the flat was given to me in Sept 2013. Now i want to sell the flat.
Can i claim Long term capital gain on this property.
Hi my grandfather is construcing a residential building the work had started in the year 2013 feb and i had availed aloan from central bank ofnindia worth 19 lakhs now his house is complet butnnow he wants to clear all his lloans by selling his lease hold propert purchase in year 1994
Now its worth rs 28 laks so can he get any tax benift under any section
Sir, 1 month back (End of July 2014)I have made some advance payment to the builder for booking a residential flat during its pre-launch period. Letter of allotment shall be allotted in future (Date not specified). In the mean time i have sold another residential flat and received earnest money for the same. Agreement of sale shall be signed in a month’s time from now (End of September 2014)when i shall receive full and final payment.
Firstly, can i claim exemption U/s 54 of the payment already made to the builder as advance for booking the new flat?
Secondly, if the builder does not call for any additional amount before the last date of filing return of income, how much amount i need to deposit in the capital gain deposit scheme?
Thirdly, what if the possession of the flat is handed over 4.5 years from now?
Regards and Thanks
Hemang Marfatia.
I have purchased residential property “A” in 2006-2007, I again purchased a property “B” in 2011-2012 50 % paid by me in my name & 50 % paid by wife in her name.
Now i sell property “A” in 2014-2015 & buy a new property against that capital gains as i was residing in porperty “A”. So is this exempt?
To the Book author / Admn.
At the first blush, it is noted, the article having been dated April 25, 2014, the reason for no mention of the since amended sections or their resulting implications is obvious. Some of the readers’ queries posted both before presentation of the Budget 2014 also do not refer to the said amendments for the same obvious reason.
Suggest, if not done already, and if feasible, an update , especially wprt to this article/ source book may be considered and done, for sake of useful guidance.
Hello Sir,
I had sold my shares ( ESPP ) of a foreign company in the US market and made a LTCG . I have an existing home loan and a house . Can I use this LTCG to pay off some part of the loan U/S 54 EC or U/s 54F
sir,
i have sold my residential flat in 2012 aug ( alloted in 1999 ) and booked a underconstucted residential flat in 2012 January and paid the total amount by 2012 dec. Sir the builder promised us that he will register the flat by 2013 Feb but till today he has not registered the property. Sir by mistake we have forgotten to sign any written agreement from the builder but he has given us the allotment letter. can I claim capital gain tax benefit under 54f.and what is the time period for underconstructed flat. Can I sigh agreement now.because if I sigh he is giving two years of the agreement signed date. is 2016 july.But the actual project has to be completed by March 2014
Sir, Date of sale of L T C Asset = 16.9.2013. Deduction u/s.54 F is being claimed in the year ending 31.3.2014 by investing new residential flat. 3 years period for not buying another house expires on 16.9.2016. Assessee plans to book another flat in joint name with daughter allotment letter being received as such. Daughter will take bank loan now and pay EMIs till 2016 and the main assessee(without violating condition of 54F of not constructing another resi house within 3 years) will pay his share of investment after 16.9.2016 from sale of other LTC Asset in FY14-15 so that he can avail 54 F again in year ending 31.3.17 for sale of other LTC ASSET during FY16-17. My question is whether allotment letter recieved in joint name in FY 14-15 would be treated as investment in another residential house to violate condition specified in section 54F in FY14-15? in terms of
Title to the property is transferred with the issuance of the allotment letter and payment of installments is only a follow up action and taking of the delivery of possession is only a formality [Vinod Kumar Jain Vs CIT TIOL706-P&H (2010)] and
Mere letter of allotment cannot be considered as investment in residential house (Shri Rasiklal M. Parikh Vs. ACIT ITA No. 2647/Mum/2011 – Assessment Year-2006-07 date of pronouncement 31.10.2012
If the construction of the property under sec 54 is not completed within 3 years,whether capital gains will be charged in the year of default or before 3 years.?
can you support this with a case law?
I an assesse who falls under section 45(2) by giving his land as stock in trade, capital gain applicable to be paid when the sale is done or registry executed. In this case whether deduction u/s 54F can be availed if the stock is sold after two years from the date of convertng the land in stock. I mean to say if assessee purchased a residential house when the stock of land is sold LTG was cristilized when the Land is converted from Capital assest to Stock in trade. Tax is payable when stock is sold so the deduction u/s 54F would be available if he purchases a residential house now.
Dear Sir,
To the best of my knowledge the cost of the property so being sold shall stand reduced by the capital gains claimed exempt u/s 54 in the concerned year.
Further the asset sold shall be deemed to be short term capital assets and the provisions shall be accordingly be applicable.
Hi, suppose a person has sold a property and reinvested the money in new property in the same year and claimed exemption u/s 54, due to unavoidable reasons he has to sell the new property bought with in 3 years and reinvested the amount in the purchase of new property, will capital gain be attracted which he had claimed exemption u/s 54.