Is section 54F allowed to the transferor of asset also?

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This discussion clarifies whether Mr A can claim Section 54F exemption on a house purchased with funds from shares originally invested by him but held in his wife Mrs A's name. The advice confirms that Mr A can claim the exemption, provided the house purchase meets the criteria. Crucially, the sale of shares by Mrs A should not be declared in her Income Tax Return (ITR); instead, it should be reported under clubbing provisions in Mr A's ITR to avoid tax liability in her return.

Shweta

Shweta (Querist)
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26 March 2023 Mr A and Mrs A are husband and wife.
Mr A invested shares of Rs 5,00,000 in FY 2016-17 in the name of Mrs. A.
Mrs A sold the shares in June2022 for Rs 50 Lakhs which is also the long-term capital gain for her.
Mr A purchased a house property for Rs 50 Lakhs in March 2022.
Query 1 - Mr A wants to claim 100 percent exemption under section 54 F. Can Mr A claim section 54 F for the purchase of house property after application of clubbing provisions of section 64 in his ITR.

Query 2 – Is Mrs A required to show sale of shares in her ITR or will it be shown in the ITR of MR A only.

Query 3 – If Mrs A shows sale of shares in her ITR, there will be tax payable in her return as the investment for 54 F is done by Mr A.
In case Mrs A is also required to show sale in ITR, how to reflect it without any tax liability?

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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27 March 2023 1. Yes.
2. No.
3. Declare it as usual with flag as income under clubbing provision.

Shweta

Shweta (Querist)
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27 March 2023 Thanks for your reply Sir. Can u explain the response 2 again.

Is Mrs A required to show sale of shares in her ITR ?

Actually Query 2 had two parts so your response is confusing me. Thanks for your patience.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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27 March 2023 No declaration in ITR of Mrs. A, when the same is declared under ITR of Mr. A under clubbing provision.

Shweta

Shweta (Querist)
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27 March 2023 Thanks so much for all your help Sir. You are really helpful in providing resolution to income tax related queries. It is a case of genuine hardship to assessee where he gifted shares to his spouse and now the shares are sold and will be taxed in the hands of transferor. There is no concept of joint return in India and so the application of laws and reporting requirements in ITR sometimes provides challenges.
Thanks again for your help.

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Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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27 March 2023 My Pleasure.

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