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Ltcg u/s 54 & rental of flat

tax payer (Consultant) (34 Points)

12 July 2014

I have two parts to te query:

1) My mother has an residential flat that she wants to sell and buy a new one. However the cash realised from the sale of the residential property will not be sufficient to buy a new house and I will have to top it up by taking additional loan. Will my mother get exemption u/s 54 for LTCG only if the new flat is registered in her name or the name of registration does not matter as long as the sale amount is ploughed back into another residential property?

2) Say the new residential property is registered in the name of my mother only although I have taken loan for the property as well (in addition to the sale amount from another residential property sold). In such a case, can I show that I am paying rent to my mother for staying in that house?

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6 Replies

Sunny jorkar (Article Assistant) (101 Points)
Replied 12 July 2014

1) It is not necessary on whose name the New residendial property is registered.

2)But Assesee need to prove that sales proceeds of old Property was used to buy New House.

3)According to me Loan must be taken by Assessee..

Tribhuvan Aditya Singh (Student as well as Self-employed) (3710 Points)
Replied 12 July 2014

1. new property need not be necessarily registered in your mother's name. it can be on your name also..... 2. if loan is taken on your name, then you cant show that you are paying rent to your mother, even though the property is in your mother's name... if loan is taken on your mother's name, then you loose the benefit of sec 24b and 80c..

Tribhuvan Aditya Singh (Student as well as Self-employed) (3710 Points)
Replied 12 July 2014

therefore it is suggested that... 1. register new property in name as you desire, it doesnt make any diff...... 2. take joint loan for purchase of prop. or only on your name and enjoy benefit of sec 24b and 80c.

Mihir (Wealth Manager) (5293 Points)
Replied 13 July 2014

Buy the new property in joint name with you and your mother.

tax payer (Consultant) (34 Points)
Replied 13 July 2014

Thanks all who responded.

For the new house, financing will be partially from the proceeds of the sale of the old house (ploughed in by mother who had titles to the house sold) and the rest from loans taken by me (as mother does not have income). Since the house is not completely purchased from the loan taken, can't there be an internal agreement to pay mother rent for staying in the house?

[The loan amount taken may even be less than 50% of the price of the new property]