CAPITAL GAIN ON INHERITED HOUSE

Tax queries 636 views 3 replies

asatwi

director

24 Points Joined October 2009

AN INDIVIDUAL HAS INHERITED 50% SHARE IN A HOUSE FROM HIS FATHER IN YEAR 2008. THE SAID PROPETY WAS PURCHASED BY DECEASED FATHER IN YEAR 2007 FOR RS. 47 LACS. WHILE PURCHASING THE SAID PROPERTY IN 2007 FATHER HAD CLAIMED DEDUCTION U/S 54 AMOUNTING TO RS. 17 LACS. SECTION 54 REQUIRED THAT THE NEW HOUSE PURCHASED HAS TO BE HELD FOR 36 MONTHS. IF SOLD PRIOR TO 36 MONTHS THE BENEFIT CLAIMED U/S 54 IS REDUCED FROM THE COST OF THE PROPERTY. WILL THIS RULE APPLY TO THE SONS WHO INHERITED THE SHARE IN PROPETY? CAN THE SON CLAIM THAT HE IS NOT THE ASSESSEE WHO HAS CLAIMED THE BENEFIT UNDER SEC 54 & HENCE NO REDUCTION SHOULD BE DONE FROM THE COST OF THE ASSET WHILE COMPUTING THE CAPITAL GAIN?

Replies (3)

Dhruv

Chartered Accountant

308 Points Joined October 2008

As per my understanding, the interpretation for this has to be taken on a contextual basis from the Act, since there is no specific clause regarding the same. In the case of advance money forfeited ( Section 51), the value of advance money forfeited is not deducted from the cost of acquisition of the current owner ( when the property is inherited ) . Similiarily, the no amount would be deducted in case of inheriting owner, incase he buys a new house withing the prescribed limit as per section 54.

CA Rahul Jain

1162 Points Joined December 2007

In one way we can say that the restriction of section 54 is on the house and not on the assessee. If once the exemption is claimed u/s 54 by purchasing new house then that house shall not be sold for 36 months. We can interpret that the onus is on the house not on the assessee.

So, the house cannot be sold for 36 months even if inherited......

Priyanka

Chartered accountant

371 Points Joined September 2007

i agree with Mr.Rahul. Restriction is on House and not on assessee. in order to retain benifit availed u/s 54, u should not sell the asset within 3 years