Sec 54 deduction

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26 Points Joined November 2022
Hi, Mr.X is a Senior citizen assesee, he bought vacant plot in March 2023 and later sold his residential property in December 2023, out of the proceed received, he started construction of the vacant plot for his own residential purpose, which is still under construction.
Please let me know, if he can claim the deduction under 54 for Vacant land purchase price and construction cost of the property for residential use, to avoid the Capital Gain for the one property sold.
please guide

thanks
shashi kiran
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On 23 September 2024 at 13:10 Report
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Master in Accounts & high court Advocate
9570 Points Joined December 2011

Mr. X can claim deduction under Section 54 of the Income Tax Act, 1961, for the vacant land purchase price and construction cost of the property for residential use, to avoid capital gains tax on the sold property. However, there are certain conditions to be met: 1. The sold property must be a long-term capital asset (held for more than 2 years). 2. The new property must be constructed within 3 years from the date of sale of the original asset. 3. The new property must be used for the assessee's (Mr. X's) residential purposes. 4. The construction must be completed within 3 years from the date of sale of the original asset. Since Mr. X started construction within the same financial year (2023-24) and the property is still under construction, he can claim the deduction under Section 54. However, he must complete the construction within 3 years from the date of sale (December 2023) to avail the full deduction. Mr. X can claim the deduction on the following: - Vacant land purchase price - Construction cost incurred till the date of completion To claim the deduction, Mr. X must provide documentary evidence, such as: - Sale deed of the original property - Purchase deed of the vacant land - Construction receipts and invoices - Completion certificate (once the construction is complete) It is recommended that Mr. X

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On 23 September 2024 at 15:49
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26 Points Joined November 2022
Thank you sir for valuable information 🙏
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On 23 September 2024 at 17:29


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