Longterm capital gain

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

18 June 2013 I have LTCG after selling my flat in February13. Can I get tax exption u/s 54 if I purchase 2 properties? If it is restricted to one property Can I get exemption for 75% of LTCG u/s 54(one property) & 25% LTCG 54EC(bonds)?

In anticipation of deal I purchased a new flat in Novermer 12 with housing loan. In the new property agreement and loan agreement is my son's name is first and mine is joint 3rd. 28% of flat value paid by son, 2% by me & 70% loan. Loan amount is disbursed to builder. My questions are a)) With my name 3rd can I get exempption under 54. b)Can I repay 70% value of housing loan from LTCG & get exemption? c)Will there be any restrictions on eligibilty as my name is 3rd?
Which date is considered for time limits? date of signing agreement/ date of registration/ date of possesion?

Rupesh Jain

Rupesh Jain (Expert)
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18 June 2013 r/sir

property profit earned by you
then investment also in your name.
joint name exemption if you prove that investment made by you .

only one property investment in allowed u/s 54. you can purchase house in two year from tfr date or one year before tfr. date.

Querist : Anonymous

Querist : Anonymous (Querist)

18 June 2013 Can I repay disbursed housing loan from my LTCG deposit account?This will be 70% of new property valvue and also 0% of LTCG. Any limit like 1/3 my name being 3d?

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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03 August 2024 ### Exemption under Section 54

Section 54 of the Income Tax Act provides an exemption on long-term capital gains (LTCG) arising from the sale of a residential property, provided the proceeds are reinvested in purchasing or constructing a new residential property. Here’s how it applies to your situation:

#### **1. Exemption for Multiple Properties**

- **General Rule**: Section 54 generally allows for exemption on the purchase of one residential property. If you purchase more than one property, the exemption is generally restricted to the purchase of only one property.

- **Recent Changes**: The Finance Act, 2014, has introduced a change allowing exemption under Section 54 for investment in up to two residential properties, but this is only applicable if the capital gains do not exceed Rs. 2 crore. This provision applies only if the new property is purchased in India and if the conditions are satisfied.

#### **2. Allocation of LTCG for Multiple Properties**

- **Scenario**: If you are purchasing two properties and the LTCG exceeds Rs. 2 crore, you may allocate part of the LTCG to one property and the rest to the other. However, this is subject to the provision that the exemption will be available only if the total capital gain does not exceed Rs. 2 crore for both properties.

- **Alternative**: You can claim exemption for 75% of LTCG under Section 54 (for one property) and invest the remaining 25% in bonds under Section 54EC to claim exemption under Section 54EC.

#### **3. Housing Loan Repayment**

- **Exemption Eligibility**: You can repay the housing loan from the LTCG amount. To get the exemption under Section 54, the investment in the new property (including repayment of loan) should be equal to or more than the LTCG.

- **Ownership Issues**: Since your name is 3rd on the loan agreement and your son's name is first, the primary ownership of the property is in your son's name. Exemption under Section 54 is available to the person who is the owner of the new property, and since you are a joint owner, you are eligible for exemption proportionate to your ownership share.

- **Loan Disbursement**: Repaying the loan using LTCG funds is permissible. Ensure that the entire LTCG or a portion of it, as the case may be, is used for the purchase or repayment of the loan for the new property to claim exemption.

#### **4. Time Limits**

- **Date of Acquisition**: For claiming exemption under Section 54, the relevant dates are:
- **Date of Purchase**: The date on which you acquire the new property.
- **Date of Registration**: This is the date when the new property is legally transferred to you.
- **Date of Possession**: This can also be significant as it establishes when you have gained control over the property.

**Generally**, the date of registration is considered for calculating the time limits for reinvestment.

#### **5. Repayment from LTCG Deposit Account**

- **Permissibility**: You can repay the housing loan from your LTCG deposit account. The repayment should be made within the specified time limits for claiming the exemption.

- **Ownership Impact**: As long as you are a co-owner and the repayment of the loan is proportionate to your ownership stake, it should not affect your eligibility for exemption.

### **Summary of Your Queries**

1. **Can you get exemption for two properties under Section 54?**
- Yes, if the total LTCG does not exceed Rs. 2 crore, you can claim exemption for up to two properties.

2. **Can you split LTCG for Section 54 and Section 54EC?**
- Yes, you can split the LTCG and claim exemption under Section 54 for part and Section 54EC for the remaining part.

3. **Can you repay the housing loan from LTCG?**
- Yes, repayment of the housing loan from LTCG is permissible and will be considered for claiming exemption.

4. **Will there be restrictions on eligibility as you are 3rd on the loan agreement?**
- Your name being 3rd does not affect the eligibility for exemption as long as you are a co-owner of the property.

5. **Which date is considered for time limits?**
- The date of registration is generally considered for time limits, but ensure to verify the exact date as per the latest guidelines.

6. **Can you repay disbursed housing loan from your LTCG deposit account?**
- Yes, you can repay the loan from the LTCG deposit account.

For precise calculations and to ensure compliance with the latest regulations, consult a tax professional or financial advisor.

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