Saving capital gains tax
This query is : Resolved
23 February 2018
Whether the Capital Gains earned from sale of house in the name of husband can be used in construction of house on the vacant site held in wife's name
23 February 2018
Yes Tax exemption will be allowed.
A few high courts, including the Delhi high court, have taken the view that purchase of the new house in the name of the taxpayer’s spouse will also qualify for the benefit of the exemption. The courts have noted that the law does not require that the new house has to be in the name of the taxpayer—it merely requires purchase or construction of the new house by the taxpayer, which is satisfied if the funds arising from the sale of the old house are utilized for such purchase or construction of the new house.
These courts have also taken the view that since these provisions are exemption provisions, they should be interpreted in a manner to the benefit of the taxpayer, particularly when two views are possible in the matter.
However for all practical purposes, the new house, though it is held in the name of the spouse, is treated as the house of the taxpayer for income tax purposes for clubbing of income.
A few high courts, including the Delhi high court, have taken the view that purchase of the new house in the name of the taxpayer’s spouse will also qualify for the benefit of the exemption. The courts have noted that the law does not require that the new house has to be in the name of the taxpayer—it merely requires purchase or construction of the new house by the taxpayer, which is satisfied if the funds arising from the sale of the old house are utilized for such purchase or construction of the new house.
These courts have also taken the view that since these provisions are exemption provisions, they should be interpreted in a manner to the benefit of the taxpayer, particularly when two views are possible in the matter.
However for all practical purposes, the new house, though it is held in the name of the spouse, is treated as the house of the taxpayer for income tax purposes for clubbing of income.
23 February 2018
Karnataka High Court has also taken the above view in DIT Vs. Mrs. Jennifer Bhide (2011) 203 Taxman 208.
However, this is a debatable issue, proceed with caution.
However, this is a debatable issue, proceed with caution.
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