Availing 54f exemption to buy second residential property?

1. Yes

2. Correct

3. No

Thank you very much.

Further queries on the same scenario.

The new property - [Property-N] is funded with following sources in Financial year 2016-2017.
Total cost [TOTAL-COST] = Proceeds from sales of unlisted shares [LTCG-2016-2017] + Housing loan [House loan-JUNE-2017]

Therefore -- unused exemption limit = [House loan-JUNE-2017]

Now,

If I sale few more unlisted shares in financial year 2017-2018 (or next FY 2018-2019) and use the LTCG to repay the house loan,

Can I again claim exemption under section 54F because the exemption limit is not fully used as property cost is very high compared to LTCG in FY 2016-2017?

I mean:
Is exemption under section 54F is one time claim or can be claimed multiple times across multiple financial years using multiple LTCG gains

agaist the same residential propery [PROPERTY-N]?

" Is exemption under section 54F is one time claim or can be claimed multiple times across multiple financial years using multiple LTCG gains?"

Good question............

Single property investment can be availed as exemption for multiple sale proceeds (u/s. 54F total sale proceed is considered and not just LTCG), provided it satisfies other conditions of the section.

In this case, if you have already paid whole amount of the flat...... but only repayment of loan is due......... then the exemption will not be available.   Because section 54F allows exemption in construction of house property only after the capital gain arise.  ..... but if any payment is still due to builder, it will be considered for exemption.

This is somewhat confusing. Let me give my example.

1) [FY-2016-2017] Month of March 2017
I sold unlisted shares and proceeds amount was Rs. 10,00,000/-

2) [FY-2016-2017] Month of March 2017

I paid downpayment to book and pay 20% for the property cost -- Rs. 15,00,000/-  
[Rs. 5,00,000/- from savings and Rs. 10,00,000/- from #1]

3) [FY-2017-2018] Month of April 2017
I did sales agreement with the builder.

4) [FY-2017-2018] Month of June 2017
I got the home loan sanctioned for say Rs. 40,00,000/-

5) [FY-2017-2018] Month of July 2017

Bank disbursed Rs. 5,00,000/- as per the construction progress.

6) [FY-2017-2018] Month of August 2017

I sold unlisted shares and proceeds was Rs. 10,00,000/-

I want to either pre-pay the loan using stock sales proceeds or pay directly to builder depending on answers to following questions.

QUESTIONS:
1) Can I claim anything in FY 2017-2018? Note that I claimed part of the exemption limit in FY 2016-2017.

2) If yes then what is the unused exemption limit in this case? 

     A) Total cost [40L+15L] - 10L (proceeds used in 2016-2017) = 45L?

     B) Downpayment 15L - 10L (proceeds used in 2016-2017) = 5L?

     C) Total cost [40L+15L] - 10L (proceeds used in 2016-2017)  - 10L (disbursed by bank to the builder) = 35L?

3) If I pay for stamp duty and registration charges from my pocket (over and above the loan) then will that be considered as a cost of the property?

     A) For example if the stamp duty+registration is Rs. 5L then can it be added to the unused exemption limit?

"[FY-2017-2018] Month of August 2017 I sold unlisted shares and proceeds was Rs. 10,00,000/- I want to either pre-pay the loan using stock sales proceeds or pay directly to builder"

Based on payment to builder, exemption u/s. 54F can be availed for the additional payments till work is in progress; must be completed by MARCH 2019......

So, total exemption availed till date (direct payments) (10 March+10 August) = 20 lakhs.  (main point is the payments are made to builder for the construction of A HOUSE POPERTY IN INDIA)

"If yes then what is the unused exemption limit in this case?       A) Total cost [40L+15L] - 10L (proceeds used in 2016-2017) = 45L?      B) Downpayment 15L - 10L (proceeds used in 2016-2017) = 5L?      C) Total cost [40L+15L] - 10L (proceeds used in 2016-2017)  - 10L (disbursed by bank to the builder) = 35L? "           Ans. A)
 

QUESTIONS: "1) Can I claim anything in FY 2017-2018? Note that I claimed part of the exemption limit in FY 2016-2017"............. Yes, till possession of the property.

" 3) If I pay for stamp duty and registration charges from my pocket (over and above the loan) then will that be considered as a cost of the property?"                  YES
 

Thank you very much. This was little bit complicated for me but your answers were helpful.

Many people just do not know if they can avail some exemption, which is unfortunate :-(

I always wonder why cannot the tax laws be simple! Even using the simple wording helps sometimes.

For example:

Section 54F

   Instead of saying:

      owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or

   This would be very much clear:

      on the date of transfer of the original asset -- you are eligible for exemption if it is your first or second residential property

To summarise and simplify so that it is easy to understand for common people like me:

1) You are eligible for exemption 54F if it is your FIRST or SECOND residential housing property -- either FLAT or HOUSE CONSTRUCTION (can include land cost)

2) You can NOT avail this exemption if you ALREADY (on the date of sale of assets e.g. stocks) OWN 2 (or more) residential housing properties

3) To maximise the savings:

     A) If you make LTCG gains then use the entire sales proceeds to pay DIRECTLY to the builder ONLY IF the gains are relatively high i.e. GAINS to PROCEEDS ratio is high. 

     B) If that ratio is low (i.e. your investment reurn is low) then you can pay taxes (which are minimal compared to proceeds) and invest the proceeds in investments giving you better returns.

        Examples assuming the same indexation.

                    Example1:   Sales proceeds = 10L, LTCG = 1L (due to low returns)  -> Pay 20% of 1L  i.e. 20,000/- tax and invest 10L somewhere to earn better                                          returns.

                    Example2:   Sales proceeds = 10L, LTCG = 6L (due to high returns) -> Don't pay taxes, instead take exemption and save 1.2L tax :-)

4) Even if you take home loan and then avail tax exemption under section 54F by paying directly to builder: 

      --You can keep your loan amount untilized

      --And bank will disburse the untilized amount to you in the end (not sure about this though)

5) Exemption under section 54F is not bound by number of times you can claim except that it is applicable only for the same property.

   A) you can claim in different financial years

   B) you can combine sales proceeds from multiple investments

[NOTE: above one is MY INTERPRETATION derived from answers given by EXPERTS on this forum, I might be wrong at few places]

Some suitable solutions provided as per your parameters, may not be suitable to all. So, generallization as suggested by you cannot be done.

In short, let me tell......... I know driving....... but I prefer my driver.... and really love his art.

Engineers are experts in their field, but they too need doctors, advocates, even technicians..........

Finally: Do not use this understanding, in the same fashion in any of your future option, though most of it would be SIMILAR.

Sorry for more clarification............. & Good luck..

Dear friend......... you are most welcome to share your experience, only thing it cannot be generalized.  In this query, the answers given are modified from the act as most suitable to the requirement, which are bound to be objected by my colleagues.

On friendly note let me tell you......... one can do Ph.D. on this section 54F, if really interested.

No need to worry for material......... just type 'Case laws in favor of assessee u/s. 54F' on one and 'Case laws against assessee u/s. 54F' on another.......... and google it

More than 1000 cases either in favour or against....... judgements awarded by Indian Courts!!!

Little bit off topic but doesn't it (large number of litigations for this 54F) also mean lawmakers have failed the tax paying citizens?

This is just a single section. How many such controversial sections would be there?

Why can't lawmakers simplify the law?

Not everyone in this country would be able to afford the services of CAs and lawyers.

The reasons laws should be made simple for common man.

Direct tax code is in pipeline, expected to replace the 55-58 years old tax regime......... hope Modi Government may bring it into limelight, the way they did for GST.