Long term capital gain exemption u/s 54

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

11 March 2018 Dear Friends, One of my client sold a flat in Mumbai. This flat was his ancestral property which he got after demise of his father. This flat was in quite an old building and hence all the members of the Housing society entered into an agreement with one of the builder to reconstruct the building and allot them a comparatively smaller flat. Entire cost of construction was born by the builder for which he received some flats. After getting the possession of the new flat my client sold the flat. My query is : If the previous owner (father of my client ) held the property for more than 20 years but time duration between my client becoming the owner (after his father’s death) and selling the flat developed by builder is less than 36 months will he be able to claim exemption u/s 54 if he invests in another flat. I want the opinion from the specific angle that the old flat is not sold rather a new flat of different size (allotted to him in place of old flat by the builder ) is sold which my client hold for less than 36 months before it was sold. Pl reply and oblige.Thanks in advance for your cooperation.

KAVIRAJA ADDANGADI

KAVIRAJA ADDANGADI (Expert)
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11 March 2018 If ancestral property entered joint development agreement apart from his share what ever he sold will amount to long term capital gains, as per sec 54 you can not own more than one house to claim CG exemption, So owner of Ancestral property has to discharge Capital Gains tax for his share, if he only registering development party share he has to discharge CG since property held by him he can set off Development or Construction cost while calculating Gain.

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