Construction of house in a preexisting land u/s 54f

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T K Ganesan (Querist)
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09 February 2012 One of the assesee has raised Capital Gain of Rs. 15 lacs in the Financial Year 2011-12. The assessee has already purchased a land in the F Y 2007-08. Now assessee wants to construct the house in the above pre existing land (i.e Purchased before capital gain) and wants to claim the construction cost as exemption U/s 54F. Is it allowed?

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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09 February 2012 Construction cost incurred after raising the capital gains only, will be allowed U/s 54F.

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T K Ganesan

T K Ganesan (Querist)
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09 February 2012 I agree sir. But assessee has purchased the land in 2007-08. Capital Gain in 2011-12 and is going start Construction in the land in 2012-13. whether it is allowed u/s 54F

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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09 February 2012 Land itself can not be said a residential house.

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For claiming exemption U/s 54F, subject to certain conditions, purchase or construction of new residential house is required.
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When the construction work is carried on, is more important here.
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If you have purchased earlier, cost of land will not be eligible, but construction carried on later after sale of capital asset will qualify for exemption.
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If land is purchased subsequently, it's cost can also be considered for exemption.
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