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LTCG in income tax return

Chinese Chef (Others) (49 Points)

16 July 2014

Folks,

I had purchased a residential property in September 2009 and sold it off in May 2013 leading to Long Term Capital Gain. Subsequently, I purchased another residential property in Jan 2014 investing all the money obtained from selling the previous property. The new property has been registered under my and my parents' names. Major portion of funding has been done by me and the rest was provided by my parents to purchase the new property.

My question is: - How do I mention this LTCG as well as claim the exemption from associated tax by investment into new property in the Income Tax Return I'm planning to file shortly?

Looking forward to your expert opinions.

Many thanks, CC

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Studentsca (CA Practice ) (3577 Points)
Replied 16 July 2014

Section 54:

Old Asset: Residential Property, New Asset: Residential Property Under Section 54 –

Any Long Term Capital Gain, arising to an Individual or HUF, from the Sale of a Residential Property (whether Self-Occupied or on Rent) shall be exempt to the extent such capital gains is invested in the

1. Purchase of another Residential Property within 1 year before or 2 years after the due date of transfer of the Property sold and/or

2. Construction of Residential house Property within a period of 3 years from the date of acquisition Provided that the new Residential House Property purchased or constructed is not transferred within a period of 3 years from the date of acquisition If the new property is sold within a period of 3 years from the date of its acquisition, then, for the purpose of computing the capital gains on this transfer, the cost of acquisition of this house property shall be reduced by the amount of capital gain exempt under section 54 earlier. The capital gain arising from this transfer will always be a short term capital gain. Quantum of Deduction under Section 54 Capital Gains shall be exempt to the extent it is invested in the purchase and/or construction of another house i.e.

1. If the entire amount is equal to or less than the cost of the new house, then the entire capital gain shall be exempt 2. If the amount of Capital Gain is greater than the cost of the new house, then the cost of the new house shall be allowed as an exemption Relevant Points regarding Section 54 1. Budget 2014 has introduced an amendment to Section 54 and from Financial Year 2014-15 i.e. Assessment Year 2015-16, exemption under Section 54 is available if the amount is re-invested in 1 Residential House situated in India.

2. The exemption under Section 54 would also be available if the amount is invested in an under construction residential house. However, Service Tax is levied on purchase of under construction property.