Exemption u/s 54 of income tax act

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Querist : Anonymous

Querist : Anonymous (Querist)

02 May 2018 DEAR SIR,
A HUSBAND & WIFE ARE CO-OWNERS OF A RESIDENTIAL PROPERTY, WHICH WAS SOLD BY THEM IN APR,2018 RESULTING IN LONG TERM CAPITAL GAINS.
THE HUSBAND IS HAVING A SITE IN HIS NAME AND WANTS TO INVEST LTCG IN CONSTRUCTION OF A RESIDENTIAL HOUSE THERE.
HIS WIFE ALSO WISH TO INVEST IN THE CONSTRUCTION OF THE HOUSE BY INVESTING HER SHARE OF LTCG.
THE NEW RESIDENTIAL HOUSE WILL BE OWNED BY BOTH.

WHETHER WIFE WILL GET EXEMPTION U/S 54 BY INVESTING IN THE ABOVE MENTIONED MANNER?
THANKS & REGARDS

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)

02 May 2018 Yes wife will get exemption u/s 54 by investing in above mentioned manner.
The Mumbai ITAT (Income Tax Appellate Tribunal) has recently held that if someone has made the entire investment for the purchase of a new house, he is entitled to get the full benefit of the income tax exemptions, even if the property has been purchased in the name of a close relative.

Under the existing provisions of the Section 54 of the Income Tax Act, if a taxpayer earns any income by way of Long Term Capital Gain on sale of a residential property, he can claim it exempt by re-investing the amount of capital gain in purchase of another residential house. The law provisions require the seller to reinvest the gain amount within the stipulated time and there is no specific requirement that he himself should be the legal owner of the reinvested property.

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