Section 54 exemption on joint property investment

Tax queries 418 views 3 replies

Sreevidhya V

478 Points Joined March 2017

Dear All,

One of the client is selling her residential property along with land in Nov 2026 and LTCG arises. there are two queries

the new flat under construction is a joint property held by herself and spouse. In this case can she claim the entire amount under sec 54 or only her share? She is paying the whole amount from her single bank account for this flat and the receipt is given by the builder in both the names.
already 1% tds deducted by both she and her spouse under 194IA against the builder for the instalments paid till today (reflected in respective 26AS) and now only few instalments are left. So in this case, since the registration is pending, can she register the flat in her name only for avoiding any litigation?

Replies (3)

Rama chary Rachakonda

Master in Accounts & high court Advocate

9434 Points Joined December 2011

She can claim exemption under section 54 only for her share of the property. The exemption is available based onthe individual's share in the new asset (the flat under construction) in proportion to the investment made out of the sale proeeds of the original property.

For tax purposes under section 54, if the client wants to claim exemption for the entire amount invested in the joint property, it might not be feasible if the property is registered in her name only because the property is jointly held with her spouse. Registration in one name for avoiding litigation is a legal considereation. From a tax perspective, the exemption under section 54 would typically be in proportion to the individuals's share in the property.

sabyasachi mukherjee

27983 Points Joined May 2017

Investment in house property who had done.

As a result of the fact , he is entitled to take benefit of exemption and no one else

Sreevidhya V

478 Points Joined March 2017

Hi,

@ ramachary sir, Thank you for the reply sir. It gave more clarification to me.

But the client insist on claiming it, since the payment is done by her only, and added spouse name only as a social precaution, she should be able to claim it. The husband is not claiming this deduction anywhere.

Some of the case laws also being given by her stating the same, that assessee is allowed deduction for jointly held properties based in fund allocation by assessee.

But in my opinion too, I think it can be contended by department by merely going by the facts of the case.

Has anyone come across such a scenario and the exemption given? Pls suggest.