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Urgent Query Exemption u/s 54

CA Abhishek Singh (practice) (2105 Points)

10 May 2011

ONE OF OUR CLIENT (INDIVIDUAL) HAVING 1 LONG TERM RESIDENTIAL HOUSE PROPERTY SOLD THE SAME THIS YEAR. HE WANT INVEST THE SALE PROCEEDS IN BUYING A SHOP. CAN HE GET BENEFIT OF EXEMPTION U/S.54 IF-

1. BUYS RESIDENTIAL HOUSE PROPERTY BY AVAILING A BANK LOAN AND USING SALE PROCEEDS FOR BUYING A SHOP.

2. BUYS RESIDENTIAL HP FROM SALE PROCEEDS AND BUY SHO P BY AVAILING BANK LOAN .

IS THEIR ANY OTHER WAY THROUGH WHICH TAX CAN BE SAVED.

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2 Replies

CA Shraddha Bankar (CA) (175 Points)
Replied 10 May 2011

The client can get exemption u/s 54 by buying or constructing Residential HP from the sale proceeds provided he utilise the whole of sale proceed.

Alok Siddapur (Consultant) (229 Points)
Replied 11 May 2011

The requirement is that he should have purchased a residential house within 1 year before or 2 years after the date of transfer or constructed a residential house within 3 years after the date of transfer. There is no requirement that residential house should be used only for residential purpose. So 2nd option would be better. He can also invest in REC bonds u/s 54EC