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LTCG - Property Sale

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Shashi Kiran Kerur

13 Points Posted on 08 April 2023

Hi Team,

Need assistance on the below scenario.

My father owns an independent house which he intends to sell and buy an Apartment. The potential buyer is seeking some time (3-4 months) before he can get the property registered in his name.

But he has agreed to give some initial amount (get into an agreement that he will pay X amount now and the remaining during registration) which we intend to use to buy the apartment now.

Can my father claim LTCG exemption when he gets the proceed (in 3-4 months) after the buyer gets the independent house registered in his name.

Thanks

Replies (6)

Quick Summary

This discussion clarifies whether a father can claim Long Term Capital Gains (LTCG) tax exemption when selling his house and buying an apartment, even if the buyer makes an initial payment and the remaining balance is received later. The consensus is that exemption under Section 54 of the IT Act is permissible, provided the new property is purchased within the specified timeframes. It's also confirmed that the funds for the new property don't need to be the exact proceeds from the sale; using pooled money or loans from relatives is acceptable.

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

212419 Points Posted on 08 April 2023

Yes, allowed under sec. 54 of IT act.

As per the section the exemption on LTCG can be claimed by a house purchased within one year before or two years after the sell of the house property.

Shashi Kiran Kerur

13 Points Posted on 08 April 2023

Thanks sir for the quick response.

But the cost of the apartment is less than the total proceed he will get from independent house (initial agreement amount + amount paid during registration).

The initial agreement amount will not suffice to buy the apartment, hence we will pool (me & my brother) some money and buy the apartment in my fathers name now. The proceed which he receives later will be in his account and he might pay the pooled money to me and my brother. Even in this case he can claim the LGCG exemption is it?

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

212419 Points Posted on 08 April 2023

First of all, you don't need to invest total sales proceeds, but only LTCG after indexation, for exemption u/s. 54 of IT act.

Secondly, you can finance your father for the purchase of new house property. It is not that the same money obtained from sell of the old HP is required to be invested in new HP. The basic criteria is the need of investment by the seller of the HP into another HP within specified time period, may be with financial loan from relatives or bank.