Section 54 and 54f deductions

There are 2 long term assets eligible for deductions:-

1) Deduction u/s 54 on sale of Residential house. The amount of capital gains to be reinvested in a residential house.

2) Deduction u/s 54F on FULL sale consideration of other long term capital asset (land).

The question: Can the capital gain of No. 1 above and the full consideration of No. 2 above be reinvested into one single property of a value little higher than both exemptions u/s 54 and 54F put together.?

 

Eg. If after indexation the capital gain on No.1 is Rs.20 lkhas and the full sale consideration of No. 2 is 25 lakhs, can one single house of Rs.50 lakhs be purchased and claim Rs.20 lakhs u/s 54 and 25 lakhs under sec 54F?

Replies (2)

The Mumbai Special Bench's decision  in a case was

  1. Exemption u/s 54 and/or 54F is allowable for one house only.
  2. If assessee has purchased more than one house, choice will be with assessee to select on which house he wants to avail exemption u/s 54 and/or 54 F as the case may be.
  3. If more than one unit are purchased and made into one unit for the purpose of residence, it will be considered as one house for claiming exemption u/s 54 and/or 54 F.
  4. If floor is added to a new house , it remains one house , therefore exemption for both the new house and the house on added floor shall be taken together for claiming exemption u/s 54 and/or 54F.


so 54 & 54F can used for one house provded the taxpayer does not have another house and the House newly purchased kept for at least for 3 yeaars other wise the deductions will be reversed.

 

Assessee can claim exemption under both Sec. 54 & 54F for investment in same house .  

ITAT HYDERABAD BENCH ‘A’ Venkata Ramana Umareddy versus Deputy Commissioner of Income-tax IT Appeal No. 552 (Hyd.) of 2012 [ASSESSMENT YEAR 2008-09] Date of Pronouncement- 18.01.2013

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