Section 54

This query is : Resolved

parag (Querist)
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13 November 2013 “A” owns one floor (one flat) in a Bunglow which is being redeveloped. The redevelopment
Necessarily involves relinquishment of his ownership rights in favour of the Developer.
He is being offered 1crore consideration by cheque plus 2 flats in the proposed new building.
Tax implications ?
My understanding :-

- Of the 1 cr , he can buy C.G. Bonds of Rs. 50 lakhs . Pay tax on the balance 50 lakhs.
- He can invoke sec. 54 – one flat against one flat .
My querry is regarding treatment of the 2nd flat he shall get.

A. Whether there is no tax implication – till he sells the 2nd flat ?

B. Whether we shall have to consider the ready reckoner value of the 2n flat – treat it as consideration received on relinquishment of ownership rights & pay tax on it now ?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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13 November 2013 1. what you have relinquished is the interest in the land on which the new development will happen.

2. The total consideration for capital gains for relinquishing of ownership rights in the land shall be Rs 1 cr plus the cost of construction of the two flats.

3. you can claim exemption for both the flats you get. there have been numerous judicial pronouncements wherein it was held that two or more flats within the same premise shall be considered as 1 flat for the purpose of claiming as exemption.

4. You may buy 50 lakhs of CG bonds and pay tax on the rest 50 lakhs.

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