Exemption u/s 54

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Suresh N (Querist)
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10 July 2012 Dear Experts,

Please clarify my doubt in giving exemption u/s 54, the husband and wife having 50% share in house property and the same was sold. In this case the Long term capital gain is taxed in both the assessee @ 50%.

After the sales, the new residential property bought in the name of husband alone. My doubt is, whether the exemption u/s 54 can claim both the assessee or it's exempted to husband alone?

If the exemption allowed only to husband means, then what is the way to give 50% deduction?

Thanks in advance.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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11 July 2012 Since the wife has NOT invested in a residential house property, she is NOT eligible for deduction u/s 54.

Suresh N

Suresh N (Querist)
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11 July 2012 Dear Sir,

Sec. 54 says, the long term capital gain should be invested in purchase or construction of residential house property and not talking about title of property. The same was reflected in the case law of "CIT vs T. N. Aravinda Reddy (1979 120 ITR 460"

Please help on this. Thanks in advance

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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21 July 2024 In the scenario you've described, where a residential property was jointly owned by husband and wife, and subsequently sold, and a new residential property was purchased in the name of the husband alone, the exemption under Section 54 of the Income Tax Act can be claimed as follows:

### Exemption under Section 54:

1. **Ownership of Old Property and Capital Gain Calculation**:
- The old residential property was jointly owned by the husband and wife with a 50% share each.
- Upon sale, the long-term capital gain would be calculated based on their respective shares in the property. For instance, if the total capital gain is ₹20 lakhs, each would have ₹10 lakhs as their share of the capital gain.

2. **Reinvestment in New Property**:
- To claim exemption under Section 54, the capital gains must be reinvested in another residential property.
- The new residential property has been purchased in the name of the husband alone.

### Clarification on Exemption:

- **Exemption Available to Husband Alone**: According to the provisions of Section 54, the exemption would be available to the individual who is the taxpayer and who reinvests the capital gains. In this case, since the new property has been purchased in the name of the husband alone, he would be eligible to claim the exemption under Section 54.

- **No Exemption for Wife**: Since the new property is not jointly held and is solely in the name of the husband, the wife cannot claim exemption under Section 54 for her share of the capital gain.

### Addressing the 50% Deduction Issue:

- **Tax Implication for Wife**: The wife will need to pay tax on her share of the capital gain (50% of the total capital gain).
- **Utilization of Capital Gain**: If desired, the wife can utilize her share of the capital gain to invest in another residential property in her own name or jointly with her husband or use it for any other eligible investments to avail tax benefits under other provisions of the Income Tax Act, such as Section 54EC (investing in specified bonds) or Section 54F (investment in a new residential house).

### Conclusion:

- The exemption under Section 54 can be claimed only by the husband since the new residential property has been purchased in his name alone.
- The wife will need to pay tax on her share of the capital gain but can explore other tax-saving options available under the Income Tax Act for her portion of the gain.

It's advisable to consult with a tax advisor or chartered accountant to ensure compliance with the provisions of Section 54 and to optimize tax benefits based on individual circumstances.

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