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LTCG on sale of plot for joint owners

manish (author) (68 Points)

03 July 2010

Dear friends,

A & B were allotted a residential plot in February 2007. (registry still not done). They sell the plot in May 2010 for an amount of Rs. 1 crore.

How should they proceed further in order to avoid LTCG ?

Suppose A&B decide to purchase a residential plot costing Rs. 1 crore (in joint names). Whether they would be still liable to LTCG or they will have to do construction on the plot within three years?

If construction is a must to save LTCG, then how much construction?

Since the entire sale consideration has already been invested in the cost of the plot, whether A or B can do construction from his own funds?

please reply accordingly to the above questions.

thanks in advance

manish

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2 Replies

vishnupriya (CA Final) (1418 Points)
Replied 05 July 2010

In your case you got 2 options

1. U/s 54 EC amount invested in the specified bonds issued by REC or NABARD can be claimed as exemption for LTCG.They should be invested within 6 months of transfer to claim exemption.

2.U/s 54 F within a period of 1 year before or 2 years after the date of transfer, a residential house is to be purchased or within a period of 3 years after the date of transfer a residential house is to be constructed.

The cost of new residential house or LTCG whichever is lower is exempt from tax.

So simply purchasing a plot is not enough to get exemption.

If you purchase/sell any property in joint names, the percentage of share is considered.