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Whether benefit u/s 54 is available?

CA Priyank (Priyank Sanghavi & Co) (296 Points)

05 December 2010

Hiiiiii Friends?????

One of my client want an advise on an issue as below.

He earns LTCG on selling a House Property. He want to take the benefit u/s 54 for deduction. He also want to make the payment for new house by taking loan from bank as amount of new house is too big than what he received by selling the old house. The data is as below.

OLD HOUSE:

Sale consideration : Rs. 40,00,000

INDEXED COA: 2,00,000

LTCG: 38,00,000

NEW HOUSE:

Value of New House: 60,00,000

1. Can he take the housing loan from Bank as we require to pledge our new house with bank?

2. Can he take the loan from relative without any security?

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11 Replies

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 05 December 2010

loan and sec 54 both are diff issues and both can be availed togather

MAS007 (ACCOUNTANT) (124 Points)
Replied 05 December 2010

Dear Priyu,

Loan can be definately availed. Exemption u/s. 54 shall be limited to38,00,000(Actual Capital gain) because it is lower of the capital gain or amount invested in new property(Investment in New Property60,00,000).

Taking Loan from either a bank or relative shall not affect the exemption u/a. 54.

Regarding whether to take a loan from bank or relative, As per my opinion, Loan should be availed from tha bank as it should give deduction u/s.24(for Interest payment) & u/s. 80C(Repayment of Principle portion of Housing Loan)

Pledging the house shall not affect the exemption u/s. 54.

Thanks

Moin Shaikh

CA Deepesh Ruhela (Keen to Learn) (3271 Points)
Replied 06 December 2010

gud moin..i totally agree with u..

1 Like

Rahul Agarwal (Future CA) (217 Points)
Replied 06 December 2010

Agree with Moin.

1 Like

C.A. Jignesh N. Mehta (C.A.) (1030 Points)
Replied 06 December 2010

Totally Agree with Moin...

1 Like

Gourav Kapoor (CA Final Student) (2977 Points)
Replied 06 December 2010

agree with moin !

good !

1 Like

CA Priyank (Priyank Sanghavi & Co) (296 Points)
Replied 06 December 2010

Thanks to all of you for your best answer and confirmation.

yash bhartiya (final student) (245 Points)
Replied 07 December 2010

loan can only be taken to the extent of 22 lakh as the other 38 lakh should be invested along with it..

and thus only deduction of 22 lakh would be available u/s 80c

because u cannot get dual benefit

Nabeel (CA) (3288 Points)
Replied 07 December 2010

agree with moin......

MAS007 (ACCOUNTANT) (124 Points)
Replied 08 December 2010

Dear Yash,

There is no dual benifit & this is completely legal under the eyes of law.

Please note that the total loan amount shall be Rs. 22,00,000/-

This amount can't be treated as deduction u/s 80C

The LTCG arised from sale of house property of Rs. 38,00,000/- can be definately claimed as exemption u/s.54.

The Principle portion of the loan shall be claimed as deduction u/s.80C as Repament of Housing Loan & Interest Portion shall be claimed as deduction u/s.24.

The maximum amount that can be claimed u/s 80C is Rs1,00,000/- & not Rs. 22,00,000.

Hope your doubts are clear mow.

Thanks

Moin Shaikh

C.Balaji (Learner) (1867 Points)
Replied 10 December 2010

Hi friend....

Under sec - 54 - Exemption of Rs. 38,00,000 can be availed.. And the Balance Rs. 20,00,000 (Actual amount required 60lac - 40lac ) can be taken as loan...

Housing Loan Post - Construction PRINCIPAL REPAYMENT is allowed as Deduction u/s 80C subject to a maximum of Rs, 1 lac and Interest part (Pre and Post construction) will get covered u/s 24b.

Regards

Balaji.C