Exemption under sec 54

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Simran Katyal (Querist)
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15 March 2017 In regards to Sec 54 of Income Tax Act, exemption is available if:
a) New Property purchased before 1 year / after 2 years of sale of property., or
b) Constructed withing 3 yrs from sale of property

My query is that, will the exemption be available if a property is constructed before 1 year of sale of property, as section specifies 'Purchase before 1 year'.

CA Shubhanshu Jain

CA Shubhanshu Jain (Expert)
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15 March 2017 Yes the same will be applicable as section itself clarifies it.

For eg. let suppose Date of sale of property is 10th march 2017, exemption under section 54 can be claimed if
- New property is purchased between 11th March 2016 and 9th March 2019: OR
- New Residential property is constructed after date of sale but before 9th March 2020.

I hope this will clear your query

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Simran Katyal

Simran Katyal (Querist)
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15 March 2017 Hello sir, My query was that new residential house property is constructed 'before 1 year of sale', will exemption be available.?

CA Shubhanshu Jain

CA Shubhanshu Jain (Expert)
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15 March 2017 if new property was purchased 1 year before and one year before means within 365 days prior to date of sale

CA Shubhanshu Jain

CA Shubhanshu Jain (Expert)
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15 March 2017 if condition is satisfied then exemption will be available

CA Gopal Somani

CA Gopal Somani (Expert)
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15 March 2017 Please find below the details -

Construction cannot precede sale of old house – To claim exemption under section 54, the construction of the new house should be within two years after the transfer of the existing house. The exemption is not available where the new construction is made before the transfer or sale of the existing house – Smt. Shantaben P. Gandhi v. CIT [1981] 129 ITR 218 (Guj.).

(Contra)

Exemption on capital gains could not be refused to the assessee simply on the ground that the construction of the new house had begun before the sale of the old house – CIT v. H.K. Kapoor [1998] 150 CTR (All.) 128.

u The date of commencement of the construction of the new house is not material. To get the benefit of section 54, the assessee must have constructed the new house within the prescribed period from the date of sale of the old house –

- See more at: https://taxguru.in/income-tax/section-54-capital-gains-exemption-qua-residential-house.html#sthash.l1EnyGp9.dpuf

So my understanding is, start date of construction does not matter but Construction should be complete withing 3 yrs from sale of property only not before.

Simran Katyal

Simran Katyal (Querist)
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16 March 2017 Thanks for the clarification.

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