Long term capital gain exemption u/s 54F
This query is : Resolved
03 August 2016
Dear All,
I have a query regarding the exemption available u/s 54F.
For F.Y 15-16 i own a plot of land and only one residential house property.
In F.Y 15-16 i sold the plot of land and have purchased another residential house property jointly owned with 2 other family member in the same year
so now i have 2 residential house property one that i have previously and the other one that is purchased now.
so will i be allowed for exemption u/s 54F for the capital gains on sale of plot?
03 August 2016
please advice me at the earliest so at to comply with the income tax requirement.
thank you
04 August 2016
Yes, sale of plot is eligible for 54F
04 August 2016
But i already have a house property and this will be the second house property that i have purchased so will i still be allowed for exemption?
03 August 2024
Under Section 54F of the Income Tax Act, the exemption is provided for Long-Term Capital Gains (LTCG) arising from the sale of a capital asset other than a residential house property, when the sale proceeds are invested in purchasing a residential house property. Here’s how it applies to your scenario:
### **Eligibility for Exemption under Section 54F**
**1. **Basic Conditions:**
- **Asset Sold:** The exemption applies when you sell a capital asset that is not a residential house property (e.g., plot of land).
- **Investment in Residential Property:** You must invest the capital gains in purchasing a residential house property.
**2. **Conditions for Claiming Exemption:**
- **Single Residential Property:** At the time of selling the plot, you should not own more than one residential house property (excluding the one you are selling). If you own more than one residential property, the exemption under Section 54F is not available.
- **Purchase of New Property:** The new residential property must be purchased within the specified time frame (one year before or two years after the date of sale of the plot, or within three years from the date of sale for construction).
### **Applying to Your Situation:**
1. **Situation Analysis:**
- **Previous Property:** You already owned one residential house property.
- **New Property:** You purchased a new residential property jointly with two other family members.
2. **Exemption Eligibility:**
- **On Sale of Plot:** Since you owned one residential property before selling the plot, and now have two residential properties (including the new one), Section 54F would not typically apply as you already owned a residential property at the time of sale of the plot.
- **Exemption Denied:** The law stipulates that at the time of sale of the asset, you should not own more than one residential property to be eligible for exemption under Section 54F. Therefore, even though the new property was purchased with capital gains, the exemption may not be available because of your pre-existing property.
**3. **Additional Points:**
- **Joint Ownership:** The fact that the new property is jointly owned with family members does not affect the basic condition that you should not own more than one residential property at the time of sale.
- **Constructive Ownership:** Even if you claim that the new property is bought jointly, it does not alter the fact that you already owned a residential property, thereby affecting eligibility.
**4. **Alternative Consideration:**
- **Section 54:** If you were looking to claim exemption under Section 54F, you should be mindful that you cannot claim this benefit if you own more than one residential house property. In such cases, seeking exemption under other provisions like Section 54 may be explored if applicable.
### **Recommendation:**
Given the specifics of your case, where you owned a residential property before the sale of the plot and subsequently acquired another residential property, the exemption under Section 54F might not be applicable. For a more detailed analysis and potential alternatives or exceptions, consulting a tax advisor or financial expert is highly recommended. They can provide personalized advice considering your overall financial situation and any updates to tax laws.
### **Eligibility for Exemption under Section 54F**
**1. **Basic Conditions:**
- **Asset Sold:** The exemption applies when you sell a capital asset that is not a residential house property (e.g., plot of land).
- **Investment in Residential Property:** You must invest the capital gains in purchasing a residential house property.
**2. **Conditions for Claiming Exemption:**
- **Single Residential Property:** At the time of selling the plot, you should not own more than one residential house property (excluding the one you are selling). If you own more than one residential property, the exemption under Section 54F is not available.
- **Purchase of New Property:** The new residential property must be purchased within the specified time frame (one year before or two years after the date of sale of the plot, or within three years from the date of sale for construction).
### **Applying to Your Situation:**
1. **Situation Analysis:**
- **Previous Property:** You already owned one residential house property.
- **New Property:** You purchased a new residential property jointly with two other family members.
2. **Exemption Eligibility:**
- **On Sale of Plot:** Since you owned one residential property before selling the plot, and now have two residential properties (including the new one), Section 54F would not typically apply as you already owned a residential property at the time of sale of the plot.
- **Exemption Denied:** The law stipulates that at the time of sale of the asset, you should not own more than one residential property to be eligible for exemption under Section 54F. Therefore, even though the new property was purchased with capital gains, the exemption may not be available because of your pre-existing property.
**3. **Additional Points:**
- **Joint Ownership:** The fact that the new property is jointly owned with family members does not affect the basic condition that you should not own more than one residential property at the time of sale.
- **Constructive Ownership:** Even if you claim that the new property is bought jointly, it does not alter the fact that you already owned a residential property, thereby affecting eligibility.
**4. **Alternative Consideration:**
- **Section 54:** If you were looking to claim exemption under Section 54F, you should be mindful that you cannot claim this benefit if you own more than one residential house property. In such cases, seeking exemption under other provisions like Section 54 may be explored if applicable.
### **Recommendation:**
Given the specifics of your case, where you owned a residential property before the sale of the plot and subsequently acquired another residential property, the exemption under Section 54F might not be applicable. For a more detailed analysis and potential alternatives or exceptions, consulting a tax advisor or financial expert is highly recommended. They can provide personalized advice considering your overall financial situation and any updates to tax laws.
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