Buying new property to avoid capital gains tax

Yes, you may do that. You may add your name in the new property along with your mother and claim half interest deduction u/s 24 from your home loan in your ITR.

Thanks for clarifying that it is possible to register new property with added names. My confusion was will this addition break any rules which will lead to capital gains tax being enforced on the sale amount.

With regards to the loan interest amount, I think as long as I am paying the EMIs and I have an affidavit from my mother that the entire EMIs are being paid by me, I should be able to claim 100% of the interest deduction.

 

I Have two residential flat in mumbai one on rented and another i use for self living. My question is i have already sold rented house property in march 2014. and purchased a new residential property at rajasthan using capital gain amount. I also want to sele second house which i have use as a self occupied house. please suggest that this long term capital gain can i use to construct in purchased rajasthan house or i shall purchase new one. If i purchase new one than it is ppssible to claim thos LTCG because i have already one residential house. how i calculate indexed capital gain if i paid to builder as per their demand letter according to conatruction linked. please help Regards

Mr. Thomas

 

as far your concern that you would like to register new property in your name +mother and so to claim exemption from tax. 

but entire capital gain arise in hands of mother only.

 

Actually this point not clarified in income tax law. 

But some court decisons are there which depicts that if capital gain arised in hands of husband and husband would purchase new property in name of wife than he is eligible for exemption.

 

But nowhere i saw any decision where new property is in name of son or daughter and mother claim exemption u/s 54. i would like to request my seniors and friends if they have any such case law please let me know.

Yes the exemption from capital gains will be available even if partial interest in the property is purchased i.e. property is pruchased in two names.

Exemption is allowable even if a share in new property is purchased - When the Act enables an assessee to get exemption from payment of tax in respect of purchase or construction of a residential house, purchase or construction of a portion of the house should also enable the assessee to claim the exemption. It is possible that a person may not be in a position to purchase the whole residential house at a time and in the circumstances an assessee might purchase a portion of the house or some interest in the house. Thus, where the assessee sold a house and from the sale proceeds purchased 15 per cent undivided share in a house, property from her husband and her son, and she was earlier residing in that house exemption under section 54 can be allowed - CIT v. Chandanben Maganlal [2000] 245 ITR 182 (Guj.).

another case law on co-ownership:

The other Co-owners release their share or interest in the property in favour of one of the Co-owner, it will be deemed that the property has been purchased by the release. Such release also fulfill the condition under sec 54 as to purchase. - CIT v. T.N. Aravinda Reddy [1979] 120 ITR 46/2 Taxman 541 (SC)

 

i.e. purchase of a share in property allowed for exemption

Hi .. What is the implication for filing return in the subsequent year for capital gains.

i have availed cap gains exemption by investing in under construction flat.. Paid part 

Amt to builder and rest of the cap gains invested in cap gains ac in a PSb bank ac. Also got refund of the Tds on sale in the ay.

my question is .. In the second year after sale how should I show the same in the it return. I have paid more Smt to the builder by withdrawing from cap gain ac in the bank. So the ratio  will change. 

For investment of cap gain invunder construction property will the time frame be 3 yrs or 2 yrs?

thanks in advance

 

 

 

 

 

 

A.K.Banerjee

1. After expiry of 3 years you may use the funds for any purpose. There shall be no tax effect

2. Yes, if the conditions of S. 54 / 54F are fulfilled

 

Circular : No. 667, dated 18-10-1993.

Whether, in cases where the residential house is constructed within the specified period, the cost of such residential house can be taken to include the cost of the plot also

1. Sections 54 and 54F provide for a deduction in cases where an assessee has, within a period of one year before or two years after the date on which the transfer of a capital asset takes place, purchased, or has within a period of three years after that date constructed, a residential house.  The quantum of deduction is itself dependent upon the cost of such new asset.  It has been represented to the Board that the cost of construction of the residential house should be taken to include the cost of the plot as, in a situation of purchase of any house property, the consideration paid generally includes the consideration for the plot also.

2. The Board has examined the issue whether, in cases where the residential house is constructed within the specified period, the cost of such residential house can be taken to include the cost of the plot also.  The Board are of the view that the cost of the land is an integral part of the cost of the residential house, whether purchased or built.  Accordingly, if the amount of capital gain for the purposes of section 54, and the net consideration for the purposes of section 54F, is appropriated towards purchase of a plot and also towards construction of a residential house thereon, the aggregate cost should be considered for determining the quantum of deduction under section 54/54F, provided that the acquisition of plot and also the construction thereon, are completed within the period specified in these sections.

 

 

hi

i have a query

that an assessee sold a a residential house and purchased another but in coownership with his wife with in 6mts whether it is allowed for exemption u/54 or not

if yes tell m e the case law 

 

Yes, no issues.

 

DIT (International Taxation) Vs. Mrs. Jennifer Bhide

Shirish Vinayak Godbole Vs. ITO (ITAT Pune)

JCIT v. Smt. Armeda K. Bhaya, 95 ITD 313 (Mum.)

CIT Vs. Gurnam Singh, (2014) 327 ITR 278

CIT Vs. Podar Cements (P) Ltd. & Ors., (1997) 226 ITR 625 (SC) [Concept of constructive ownership was accepted by the Supreme Court]

Commissioner Of Income Tax-Xii vs Shri Kamal Wahal [https://indiankanoon.org/doc/67242754/]

CIT v. Ravindra Kumar Arora [Joint Ownership] Judgements also from P&H and Madras HC 

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