Ltcg exemption for selling separate properties for a joint house

Tax queries 293 views 12 replies

VIVEK SINHA

Exec Ed

62 Points Joined January 2015

I sold a property and booked LTCG of 35 lakhs, my wife owns a separate property in her name and if she sells it now it would have LTCG of 35 lakhs. we want to buy a new house which is priced at 70 lakh.
Qs.
1. Can we both claim section 54F (or some other section) to get LTCG exemption by selling our own individual houses to buy a joint new property? Is it so even if the property is underscontruction and may take 3-4 years to get built/registered in our name?

2. Can I buy the new house only in my name if the new property is underconstruction and may take say 4 years to build/possession/registration? One opinion I got was that the date of registration is considered for buying new house and since the new property is to be purchased within 1-2 years of selling old property I cannot claim 54f. Is that true?

3. Can we buy (and so book for now) the new house in my wife's name who eventually intends to sell the present property and use 54F to show that she is buying the other property and pay some token amout for booking in her name? Till when does she need to sell the property to avail 54F.

Replies (12)

Nitesh bind

Student CA Final

12692 Points Joined October 2012

1. If you and your wife sold different houses and jointly they purchased a New house even then both of you would Get the Deduction under section 54/54F.

2. It is not necessary that the seller should have Property only in His/her name and it should not be in joint names.

3. If house is purchased after 2 years / constructed after 3 years from the date of sale even then you would be allowed Deduction u/s 54/54F. So you could purchased a Under construction house as well but make sure it finalised within 2yr/3yr.

4. Even you could invest the amount which you got from Property sold in your name into the new property in your Wife name. Still Deduction would be allowed.
[CIT vs. Kamal Wahal]

rama krishnan

12244 Points Joined May 2017

you cannot claim deduction under 54f since the property to be sold is residential property. if you could not utilize the capital gain amount within the specified date for filing ITR then the same required to be deposited in capital gains account scheme and eventually you can claim 54 deduction but make sure that the property is purchased or constructed within 2 or 3 years respectively

Nitesh bind

Student CA Final

12692 Points Joined October 2012

Yes, Only Exemption u/s 54 will be allowed. 54F allowed when something else (other than House Property) is Transferred and net consideration is invested into New House Property.

Thanks Rama Krishnan for correcting me.

rama krishnan

12244 Points Joined May 2017

you are always welcome nitesh

VIVEK SINHA

Exec Ed

62 Points Joined January 2015

Thanks. My bad, mentioning 54 F. I meant Section 54 only.

But wanted to double check this.. so .. Two persons can both separately claim section 54 to get LTCG exemption by selling own individual houses (I have already sold last month) to buy a joint new property? Is it so even if the property is underscontruction and then have to registsred within 3 years (so October 2021 or me to take the benefit) and accordingly max 3 years from the time my wife sells her own individual property? Coz, one CA told us this is not possible. Any reference case on such a scenario?

Secondly I am assuming registration of the property is taken as the time of purchase of the new house. Booking time is immaterial.

rama krishnan

12244 Points Joined May 2017

no issues Mr. Vivek, in respect of this construction periods there are lot of case laws in favor of assessee. definitely you will get decision in your favor before appellate forums

Nitesh bind

Student CA Final

12692 Points Joined October 2012

See, all other facts are correct of my previous answer except the fact that 54F would not be allowed but 54 will be allowed.

Secondly what is to be seen is the beneficial ownership and whether you have actually spent the amount for it or not. Even if the registry is done later on still you would be able to claim Exemption u/s 54.

[CIT vs. Shahzada Begum]

VIVEK SINHA

Exec Ed

62 Points Joined January 2015

Sure. The construction period I guess is not that much of the issue. i was worried about two persons claiming 54 for separate properties for buying a new jt property. Since the CA who prepares the tax returns said no, i wanted to have an independent opinion

rama krishnan

12244 Points Joined May 2017

@ yes Mr. nitesh I didn't find any fault with your reply. I understood that you meant only 54.

@ vivek there's no restrictions in claiming deduction 54 in respect of joint property. in order to strengthen your case, include additional Clause in purchase deed that both of you have contributed equal share towards purchase.

Nitesh bind

Student CA Final

12692 Points Joined October 2012

Construction period is of Importance as I said before. Because the new property must be purchased/constructed within 2yr/3yr respectively. So keep that period in mind otherwise later on your Exemption would have to be reversed.

And again I'm confirming it that Selling 2 different property in Husband and in Wife name and purchasing one New property in joint name is Not an Issue. Exemption would be allowed in such circumstance.

Thanks.