exemption under sec54F of the Income tax Act

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Gopalarathnam Muralidharan (Querist)
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24 January 2024 Dear sir
Kindly guide on this issue
1) One client has land and building purchased in 1974 and 1.4.2001 value as given by SRO adopted. Falls under Sec 54F

2) The landover enters into Joint venture agreement in 2022 whereby total 5 units to be constructed, out of which 3 will go to owner and 2 will go to developer

3) 3 units for land owner got constructed by Developer for a cost of Rs7,80,00,000

4) Developer sold 2 units as UDS of vacant land during oct 2023

5) Consideration for landowner being

a) Monetary consideration Rs ,40,00,000
b) Sale of 2 UDS given to Dev Rs 1,00,00,000

Total Rs 1,40,00,000
6) Investment made

3 units involving construction cost Rs 7,80,00,000

7) Apparently the full value consideration invested in new building hence it would be exempt

8) In Sec 54 , if the entire sale consideration is invested in purchase/construction of one residential house within a period of 1 year before or 2 years after purchase and for construction 3 years.

9) My question is, since the client got 3 units as a consideration will he be hit by one residential house that one can buy/construct under sec54F

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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07 July 2024 Section 54F of the Income Tax Act allows for an exemption on capital gains from the transfer of a long-term capital asset if the entire net consideration is invested in a new residential house. This applies to a client who received three residential units as part of their land consideration. The entire net consideration must be invested in the purchase or construction of a new residential house. The exemption criteria include investing the entire amount of capital gains in the purchase or construction of one residential house, purchasing the new house one year before the transfer, or within two years after, and completing the construction within three years. Consultation with a tax advisor is recommended to ensure compliance and maximize tax benefits.

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