a flat is sold for 5400000 in October 2019, and the amount is invested in construction of house in a plot of land. but the land was purchased in January 2018, so will the assessee get the exemption under section 54
Yes you can claim deduction under section 54 subject to the cost of construction of house in the plot. the value of plot will not be eligible to include in the cost of new asset I. e. house construction in plot. however, I think there are case laws that permits to include the cost of plot in the cost of new asset even if the plot was purchased prior to 1 year from the date of sale of original asset
Under section 54, the construction expenses spent prior to sale of old house is not considered.
As per the query it appears the assessee has spent in construction of house between Jan 2018 and Oct 2019.
I give the extract of section 54 -----
""" The seller should purchase a residential house either 1 year before the date of sale/transfer or 2 years after the date of sale/transfer.
In case the seller is constructing a house, the seller has an extended time, ie. the seller will have to construct the residential house within 3 years from the date of sale/transfer. """"
@ kapadia what I comprehend from query is, the sale proceeds of flat that sold on October 2019 was utilized for construction of house in the plot of land that had been purchased during January 2018.
So, though the cost of plot is not eligible for deduction under section 54, the sale proceeds utilized for construction will be eligible for deduction under section 54. Correct me if I'm wrong
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