sec 54 sale of House Property & construction of house property
This query is : Resolved
05 January 2017
as per provision construction should get completed within 3 years from the date of sale or transfer.What if construction is completed before sale of old house property.
05 January 2017
Here in Sec 54 you can claim exemption as per provisions even if it has been constructed before the date of transfer. However text says that construction should be completed within 3 years after transfer and section itself is silent about construction before transfer at the same time there is no where written that construction should not be done before transfer. So it should be noted that all 54 series exemption are laid down in Act for benefiting the assessee. You can take exemption without any worry.
07 January 2017
how will the entity justify the completion of construction? does he require any certificate or something?
23 July 2025
Under Section 54 of the Income Tax Act, the key requirement for claiming exemption from long-term capital gains is the investment of the proceeds from the sale of a residential house into purchasing or constructing another residential house.
Answer to Your Query:
Construction Completed Before the Sale of the Old Property:
Can exemption be claimed if construction is completed before the sale of the old property?
As per Section 54, the exemption is allowed if the construction of the new house is completed within three years from the date of transfer (sale) of the old house property. However, the Act does not specifically prohibit construction before the sale, so if the construction is completed before the sale of the old property, you can still claim the exemption.
In essence, the completion date of the construction should fall within 3 years after the sale, but there is no restriction on when the construction can start, as long as it’s completed within the 3-year period.
Proof of Construction Completion:
How to justify the completion of construction? Does the assessee need a certificate?
To justify the completion of construction, the following are usually required:
Completion Certificate issued by the local municipal or development authority. This certificate confirms that the construction complies with local building regulations and has been completed.
Sale Deeds/Agreements related to the construction, which can show when the final construction was completed.
Photographs of the constructed house, showing its completed state (sometimes, these may be required by the assessing officer).
Electricity and water bills that are issued post-completion or connected to the new house, further showing that it is functional and completed.
Verification of Possession: If possession of the house has been given, documentation supporting the same (like an occupancy certificate) can help.
Important Points to Keep in Mind:
Exemption Timeline: The construction should be completed within 3 years from the sale date of the old property. But the start of the construction can happen before the sale of the old property.
No Restriction on Start Date: The law doesn’t impose any restriction on when construction can start, only that it must finish within 3 years after the sale of the old property.
Documentation: Make sure you have sufficient evidence to show that the construction is complete, such as a Completion Certificate or occupancy certificate issued by the local authorities.
In conclusion, you can claim the exemption under Section 54 even if construction is completed before the sale of the old property as long as it is completed within 3 years after the sale. Just ensure you have the proper documents to support the claim.
Answer to Your Query:
Construction Completed Before the Sale of the Old Property:
Can exemption be claimed if construction is completed before the sale of the old property?
As per Section 54, the exemption is allowed if the construction of the new house is completed within three years from the date of transfer (sale) of the old house property. However, the Act does not specifically prohibit construction before the sale, so if the construction is completed before the sale of the old property, you can still claim the exemption.
In essence, the completion date of the construction should fall within 3 years after the sale, but there is no restriction on when the construction can start, as long as it’s completed within the 3-year period.
Proof of Construction Completion:
How to justify the completion of construction? Does the assessee need a certificate?
To justify the completion of construction, the following are usually required:
Completion Certificate issued by the local municipal or development authority. This certificate confirms that the construction complies with local building regulations and has been completed.
Sale Deeds/Agreements related to the construction, which can show when the final construction was completed.
Photographs of the constructed house, showing its completed state (sometimes, these may be required by the assessing officer).
Electricity and water bills that are issued post-completion or connected to the new house, further showing that it is functional and completed.
Verification of Possession: If possession of the house has been given, documentation supporting the same (like an occupancy certificate) can help.
Important Points to Keep in Mind:
Exemption Timeline: The construction should be completed within 3 years from the sale date of the old property. But the start of the construction can happen before the sale of the old property.
No Restriction on Start Date: The law doesn’t impose any restriction on when construction can start, only that it must finish within 3 years after the sale of the old property.
Documentation: Make sure you have sufficient evidence to show that the construction is complete, such as a Completion Certificate or occupancy certificate issued by the local authorities.
In conclusion, you can claim the exemption under Section 54 even if construction is completed before the sale of the old property as long as it is completed within 3 years after the sale. Just ensure you have the proper documents to support the claim.
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