29 July 2015
x has purchased residential property which is under construction in the year 2013. In the year 2014 he sold the shop and purchased another residential property which is ready with ground and first floor. can he claim capital gain exemption u/s 54f ..?
18 July 2024
Under Section 54F of the Income Tax Act, 1961, an individual can claim exemption from capital gains tax arising from the sale of any long-term capital asset other than a residential house if the following conditions are met:
1. **Nature of Assets:** - The property being sold must be a long-term capital asset. - The property purchased should not be a residential house other than the one for which exemption is being claimed under Section 54, i.e., it should not be another residential property.
2. **Timeline for Purchase:** - The new property must be purchased either: - **Within one year before** the date of transfer of the original asset, or - **Within two years after** the date of transfer of the original asset, or - **Constructed within three years after** the date of transfer of the original asset.
3. **Investment in Specified Assets:** - The entire net consideration received from the sale of the original asset must be utilized to purchase or construct the new residential property. - If the entire amount is not utilized but only a part of it is used, then the exemption from capital gains will be proportionately reduced.
### Application to Your Case:
- **Original Asset:** The shop that X sold in 2014, which was purchased in 2003, is a long-term capital asset. - **New Asset:** The residential property X purchased in 2014 with ground and first floor is ready for occupation. - **Timeframe:** X sold the shop in 2014 and purchased the new residential property in the same year.
### Conditions to Claim Section 54F Exemption:
- Since X purchased a new residential property (which is ready for occupation) within the same financial year as the sale of the shop, he fulfills the condition of purchasing the new asset within the specified time frame. - The investment in the new residential property needs to utilize the entire amount of capital gains from the sale of the shop to claim full exemption under Section 54F. - As long as X meets all the other conditions mentioned under Section 54F, such as not owning more than one residential property other than the new one, he should be eligible for claiming exemption from capital gains tax.
### Conclusion:
Yes, based on the information provided: - X can claim exemption under Section 54F for the capital gains arising from the sale of the shop purchased in 2003, provided he meets all the conditions stipulated under Section 54F. - It's important to ensure that all documentary evidence and transactions are in line with the requirements of the Income Tax Act to successfully claim this exemption.
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