Exemption on long term capital gain
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
17 June 2012
if an assessee has not accounted (shown) a residential property in account books, then can he take benefit of Exemption u/s 54 against the sale consideration of such property wholly to be treated as taxable Capital Gain. And if the exemption cannot be claimed then advice me how to save such sale consideration from being taxable????
Please advice me........
Please advice me........
17 June 2012
The property remained unaccounted creates suspicion in the mind of the taxman. First of all the reasons may be ascertained. Secondly, whether in the circumstances then existed, can the source of acquiring the same can be explained by the assessee?
.
In spite of not showing the property in the accounts, whether the withdrawal or other sources support the acquisition?
.
Define the source for cost of acquisition and calculate capital gains by the normal prescribed methods and claim the exemptions to which the assessee is legally entitled.
.
.
In spite of not showing the property in the accounts, whether the withdrawal or other sources support the acquisition?
.
Define the source for cost of acquisition and calculate capital gains by the normal prescribed methods and claim the exemptions to which the assessee is legally entitled.
.
Querist : Anonymous
Querist :
Anonymous
(Querist)
17 June 2012
the assessee had purchased such property through housing loan and is also unable to account the source of purchasing such asset. But, he takes the sale consideration of such asset as wholly capital gain & want to claim exemption u/s 54 by depositing such sale consideration in capital gain deposit a/c. So, my question is can he (assessee) can claim exemption on such capital gain (sale consideration)????
21 July 2024
Under Section 54 of the Income Tax Act, an assessee can claim exemption from capital gains tax arising from the sale of a residential property if the capital gains are reinvested in another residential property. Here are the key points to consider based on your query:
1. **Purchase of Property through Housing Loan**: It is common for taxpayers to purchase property using a housing loan. This does not affect the eligibility to claim exemption under Section 54.
2. **Unable to Account for the Source of Purchase**: If the taxpayer cannot account for the source of the funds used to purchase the original property (from which capital gains arose), it typically does not impact the eligibility to claim exemption under Section 54. The focus is on reinvesting the capital gains into another residential property to claim the exemption.
3. **Deposit in Capital Gain Deposit Account**: Section 54 allows an exemption if the net consideration (capital gains) from the sale of a residential property is reinvested in another residential property either:
- One year before the sale,
- Two years after the sale, or
- Constructed within three years after the sale.
Alternatively, the taxpayer can deposit the capital gains amount into a Capital Gain Account Scheme (CGAS) before the due date of filing the tax return to claim exemption under Section 54.
4. **Claiming Exemption**: To claim exemption under Section 54:
- The assessee must purchase or construct another residential property within the specified time frames.
- The amount of capital gains (or part thereof) should be reinvested into the new property or deposited in CGAS, as per the provisions.
Based on the details provided:
- If the taxpayer has sold a residential property and wishes to claim exemption under Section 54, they can do so by reinvesting the capital gains in another residential property or by depositing them in a CGAS.
- The fact that the source of funds for the original purchase cannot be accounted for generally does not prevent claiming exemption under Section 54, provided other conditions are met.
It's important for the taxpayer to ensure compliance with all the conditions specified under Section 54 and to maintain documentation supporting the reinvestment or deposit of capital gains to claim the exemption. For specific advice tailored to individual circumstances, consulting with a tax advisor would be advisable.
1. **Purchase of Property through Housing Loan**: It is common for taxpayers to purchase property using a housing loan. This does not affect the eligibility to claim exemption under Section 54.
2. **Unable to Account for the Source of Purchase**: If the taxpayer cannot account for the source of the funds used to purchase the original property (from which capital gains arose), it typically does not impact the eligibility to claim exemption under Section 54. The focus is on reinvesting the capital gains into another residential property to claim the exemption.
3. **Deposit in Capital Gain Deposit Account**: Section 54 allows an exemption if the net consideration (capital gains) from the sale of a residential property is reinvested in another residential property either:
- One year before the sale,
- Two years after the sale, or
- Constructed within three years after the sale.
Alternatively, the taxpayer can deposit the capital gains amount into a Capital Gain Account Scheme (CGAS) before the due date of filing the tax return to claim exemption under Section 54.
4. **Claiming Exemption**: To claim exemption under Section 54:
- The assessee must purchase or construct another residential property within the specified time frames.
- The amount of capital gains (or part thereof) should be reinvested into the new property or deposited in CGAS, as per the provisions.
Based on the details provided:
- If the taxpayer has sold a residential property and wishes to claim exemption under Section 54, they can do so by reinvesting the capital gains in another residential property or by depositing them in a CGAS.
- The fact that the source of funds for the original purchase cannot be accounted for generally does not prevent claiming exemption under Section 54, provided other conditions are met.
It's important for the taxpayer to ensure compliance with all the conditions specified under Section 54 and to maintain documentation supporting the reinvestment or deposit of capital gains to claim the exemption. For specific advice tailored to individual circumstances, consulting with a tax advisor would be advisable.
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