Capital gains for family trust

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

30 March 2012 we have a family trust and i am the sole determinate benficiary.
The trust is selling some urban land.
Q. Can we claim section 54F deduction

whether the family trust needs to construct a house or i have to construct as beneficiary to claim benefit u/s 54F?

C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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14 April 2012 54F is not allowable to Trust and other entities except individuals and HUF

Querist : Anonymous

Querist : Anonymous (Querist)

16 April 2012 But the income of the family trust is to be assessed in the hands of the beneficiary under the same head. then it will be assessed as capital gain of the beneficiary. then can the benficiary claim the Sec 54 F deduction

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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18 July 2024 If the income of the family trust is assessable in your hands as the sole determinate beneficiary, and the trust sells urban land resulting in capital gains, here’s how the Section 54F deduction can be considered:

1. **Applicability of Section 54F:**
- Section 54F of the Income Tax Act allows for exemption of long-term capital gains arising from the sale of any asset other than a residential house, if the proceeds are invested in a residential house property.
- As the beneficiary, if the capital gains arising from the sale of urban land by the trust are assessed in your hands, you can claim the Section 54F deduction provided you fulfill the conditions laid down under this section.

2. **Conditions for Claiming Deduction:**
- You must invest the net consideration (i.e., the amount of capital gains after deducting any expenses incurred in connection with the sale) into the purchase or construction of a new residential house property.
- The investment must be made within one year before or two years after the date of transfer of the original asset (urban land). Alternatively, you can invest in the construction of the residential house within three years from the date of transfer.
- You should not own more than one residential house, other than the new one being purchased or constructed, on the date of transfer of the original asset (urban land).

3. **Role of Trust and Beneficiary:**
- The trust, as the entity selling the urban land, will realize the capital gains. These gains, when assessed in your hands as the beneficiary, can qualify for exemption under Section 54F if invested in a new residential house property.
- The trust itself does not claim the deduction. Instead, you, as the beneficiary and taxpayer, claim the deduction on your personal income tax return for the assessment year in which the capital gains are taxable.

4. **Documentation and Compliance:**
- Ensure that the investment in the new residential house property is properly documented. Keep records of the sale of urban land, computation of capital gains, and details of the new property purchased or under construction.
- File your income tax return accurately reflecting the exemption claimed under Section 54F, providing necessary details and supporting documents.

In conclusion, as the sole determinate beneficiary of the family trust, if the capital gains from the sale of urban land are assessable in your hands, you can claim the Section 54F deduction by investing the proceeds in a new residential house property. Ensure compliance with the conditions laid down under the section to avail the exemption successfully.