Capital Gain Problem

Tax planning 1228 views 6 replies

MUKUL JAIN

PARTNER

29 Points Joined September 2010

One of my client had purchased a Residential House for Rs. 3/- (1 + 2(Loan) . After 3 Yr. that house was sold by him in Rs. 4/-. Assume the LTCG arise from this sale is Rs. 1 (after indexation).

Now after this sale he rapaid the balance loan outstaning of Rs. 1 from the sale proceeds and Rs. 2.5 used for his personal purposes and balance Rs. 0.5 used for purchasing the new residential house. The cost of new residential house is Rs. 3. Balance Rs. 2.5 arrange by him from hoUse loan.

Now my questions are given as under:-

1. Can he take the tax benifit of Rs. 1 of repayment of loan otherwise than 80C.
2. Can he take the exemption under 54 for whole of the LTCG of Rs. 1 while he used only Rs.0.50 for purchasing of new residential property.

Plz give your suggestion in this regard with relevent provisions of Income tax Act, 1961

Thanks & Regards

CA. Mukul Jain

Replies (6)

U S Sharma

glidor@gmail.com

21063 Points Joined January 2010

Originally posted by : MUKUL JAIN
	One of my client had purchased a Residential House for Rs. 3/- (1 + 2(Loan) . After 3 Yr. that house was sold by him in Rs. 4/-. Assume the LTCG arise from this sale is Rs. 1 (after indexation). 4-3(1+2)=1 ( where is indexation?) Now after this sale he rapaid the balance loan outstaning of Rs. 1 from the sale proceeds and Rs. 2.5 used for his personal purposes and balance Rs. 0.5 used for purchasing the new residential house. The cost of new residential house is Rs. 3. Balance Rs. 2.5 arrange by him from hoUse loan. Now my questions are given as under:- 1. Can he take the tax benifit of Rs. 1 of repayment of loan otherwise than 80C. ( NO) no tax benefit 2. Can he take the exemption under 54 for whole of the LTCG of Rs. 1 while he used only Rs.0.50 for purchasing of new residential property. (NO) benefit is restricted to 0.50 only. Plz give your suggestion in this regard with relevent provisions of Income tax Act, 1961 Thanks & Regards CA. Mukul Jain

Mohammad Asif

chartered accountant

191 Points Joined February 2010

YOU WILL NOT GET TAX BENEFIT OF REPAYMENT OF LOAN OTHERWISE THAN SECTION 80C.

IN THE SECOND QUERY PLEASE MENTION THE TIME PERIO OF THE PURCHASE OF NEW PROPERTY.

CA Saiyum khan

Practicing CA

690 Points Joined November 2008

Logically you will get benefit of Rs.0.50 under section 54. However there are some judgements in favor of assessees under special circumstances where full amount of capital gain has been allowed as deduction u/s 54 irrespective of the source of funds for the purchase of new house.