Section 54
This query is : Resolved
23 January 2013
Suppose I sold a land in March 2012 for 30 lacs and LTCG aising is 20 lacs. I have already booked a flat of builder's scheme in January 2011 which is under construction and I have been paying instalments till now. The total amount paid till now is Rs.30 Lacs. The flat is in joint name of me and my wife and payments are being made for accounts of both of us without any proper share. Can the payment of flat be utilised be me for the purpose of saving capital gain and upto what extent. Will booking be flat be deemed as purchase or construction. I have not invested the capital gain amount in account opened with Nationalised Bank for this purpose. Can the amount paid since beginning for flat be utilsed for claiming exemption.
23 January 2013
The amount paid as installments or otherwise from the account of the seller till 31.08.2012 (please check you due date)can be treated as amount invested out of the sales consideration of Rs 30 lacs and the amount, which has been paid after the due date was required to be paid out of the Capital Gains Account. However, to the above extent you are eligible for exemption U/s 54.
.
.
23 January 2013
Can the amount paid since beginning for flat be utilsed for claiming exemption
23 January 2013
Yes- "Since Beginning" should not be prior to one year from the date of transfer of land.
.
.
23 January 2013
Whether this flat will come under construction or purchase. I think that it will come under construction and so the period will be 3 years after sale.
23 July 2025
Your case involves claiming capital gains exemption under Section 54 for an under-construction flat purchased jointly with your wife before selling a long-term capital asset (land). Let’s address each issue in turn based on the facts and Section 54 provisions.
🔍 Facts Recap:
Land sold: March 2012
LTCG: ₹20 lakhs
Flat booked: January 2011 (before land sale)
Total flat cost: ₹30 lakhs (paid in installments)
Joint ownership: You and wife
Capital gain not deposited in Capital Gains Account Scheme (CGAS)
✅ Answers to Your Questions:
❓ 1. Can payments made from January 2011 onward be considered for exemption?
🔹 Yes, but with conditions.
Section 54 allows exemption if the new residential house is purchased within 1 year before or 2 years after, or constructed within 3 years after the date of transfer.
Since you sold the land in March 2012, any payment made on or after March 2011 (i.e., within 1 year before sale) can be considered for “purchase”.
Installments paid before March 2011 will not be eligible.
❓ 2. Is the flat “purchase” or “construction”?
🔹 Since the builder's flat is under construction, it will be treated as "construction" under Section 54.
Hence, the exemption applies if construction is completed within 3 years from the date of sale (i.e., by March 2015).
Important: Courts (e.g., ACIT v. Vinay Mishra) have held that under-construction builder flats booked before sale still qualify as construction if possession is handed over within 3 years.
❓ 3. What about payments not routed through CGAS?
Since you did not deposit the LTCG in a Capital Gains Account, this is only an issue if the installments are paid after the due date of filing return (likely 31 July 2012).
Installments paid up to 31 July 2012 from any account are acceptable.
For payments after 31 July 2012, exemption is allowed only if amount was deposited in CGAS before due date.
Since this wasn’t done, the portion of LTCG not used before 31 July 2012 may be taxable, unless courts grant relief (which some have done if possession is completed in time).
❓ 4. What if the flat is jointly owned?
Yes, you can still claim exemption under Section 54 even if the property is jointly held, provided:
You are the owner of the original capital asset sold, and
The new house is purchased in your name (alone or jointly), and
Payment is made from your account (or your share in joint payment is traceable)
So if you can establish that the ₹20 lakhs of LTCG were invested in the flat (even jointly), the exemption is allowed to the extent of your contribution.
🔍 Facts Recap:
Land sold: March 2012
LTCG: ₹20 lakhs
Flat booked: January 2011 (before land sale)
Total flat cost: ₹30 lakhs (paid in installments)
Joint ownership: You and wife
Capital gain not deposited in Capital Gains Account Scheme (CGAS)
✅ Answers to Your Questions:
❓ 1. Can payments made from January 2011 onward be considered for exemption?
🔹 Yes, but with conditions.
Section 54 allows exemption if the new residential house is purchased within 1 year before or 2 years after, or constructed within 3 years after the date of transfer.
Since you sold the land in March 2012, any payment made on or after March 2011 (i.e., within 1 year before sale) can be considered for “purchase”.
Installments paid before March 2011 will not be eligible.
❓ 2. Is the flat “purchase” or “construction”?
🔹 Since the builder's flat is under construction, it will be treated as "construction" under Section 54.
Hence, the exemption applies if construction is completed within 3 years from the date of sale (i.e., by March 2015).
Important: Courts (e.g., ACIT v. Vinay Mishra) have held that under-construction builder flats booked before sale still qualify as construction if possession is handed over within 3 years.
❓ 3. What about payments not routed through CGAS?
Since you did not deposit the LTCG in a Capital Gains Account, this is only an issue if the installments are paid after the due date of filing return (likely 31 July 2012).
Installments paid up to 31 July 2012 from any account are acceptable.
For payments after 31 July 2012, exemption is allowed only if amount was deposited in CGAS before due date.
Since this wasn’t done, the portion of LTCG not used before 31 July 2012 may be taxable, unless courts grant relief (which some have done if possession is completed in time).
❓ 4. What if the flat is jointly owned?
Yes, you can still claim exemption under Section 54 even if the property is jointly held, provided:
You are the owner of the original capital asset sold, and
The new house is purchased in your name (alone or jointly), and
Payment is made from your account (or your share in joint payment is traceable)
So if you can establish that the ₹20 lakhs of LTCG were invested in the flat (even jointly), the exemption is allowed to the extent of your contribution.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Section 270A penalty
- GSTR 1- Amend Credit Note
- Supply to unit situated in SEZ
- TDS AFTER SUBMISSION OF 15G OR H
- Tax liability on gift amount given to blood relation
- International transfer pricing- -> father entity vs son entity ->WHERE NO mutual say in management
- To Whom the Professional Invoice should be Raise
- Reimbursement of expense- GST applicable or not
- Acting as an Agent
- TDS- defaults - old period ie. F.Y. 2012-2013 etc, etc
- Form 104 stamp paper deed
- GSTR 9C- Table 9
- GST Registration Application -Rejected
- Problem in filing Returns for International workers in EPFO
- Clarification for reversal of IGST on transfer of duty-free imported goods from EOU to DTA unit
- EXCESS CREDIT REALTED GST REVERSAL
- Export invoice not reported
- CA Articleship Extension Matter
- GST OFFICER WRONG NOTICE
- "Please ensure that the Total of the Deductions u/s 54F match the same in Table D in Sch CG"
Trending Online Classes
-
Live Course on GSTR 9 & 9C for FY 24-25(Detailed discussions, FAQ, Case studies and Live demo of GSTR 9/9C on GST Portal)
Industry Expert16 November 2025
CAclubindia
