Section 54 exemption

This query is : Open

Querist : Anonymous

Querist : Anonymous (Querist)

21 August 2013 suppose 1 person have sold residential plots & started investing such capital gains in construction of residential house. construction of such residential house is started & during the course if such person sold another residential plots within limits of 3 years than can he utilize capital gains in the same construction of residential house?
ie 1st he sold some residential plots & started construction of his residential house and again he sold 1 or 2 residential plots & such capital gain is utilized for the same under constructed ( construction of such residential house started), than can he get exemption u/s 54 for both sale of residential plots if he invest such amount in construction of residential house? please suggest me soon so as i can guide accordingly.

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

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
Follow

21 August 2013 Owning of a residential Plot does not give you residential house. So to become the owner of a Residential house you can sale any number of residential plots. The capital gains on all plots adding together shall be eligible for deduction u/s 54 and any amount not utilised shall be taxed finally as Capital Gains.

Suppose you have sold 3 residential plot
A for 5 lacs and capital gain is 2 lac
B for 15 lacs and capital gain is 8 lacs
C for 20 lacs and capital gain is 15 lacs

So your total Capital gain is 25 lacs then you have to utilise the entire capital gains in your residential house to get the exemption from Capital Gains within the specified time and the amount must be deposited in capital gain account otherwise it will not be allowed.

Message likes : 1 times

Querist : Anonymous

Querist : Anonymous (Querist)

21 August 2013 as in your example, if residential plot "c" is sold after construction has been started for residential house with in 1 year , than would that capital gain be utilized for such construction of residential house?

Upgrade to CAclubindia Pro. Subscribe Now!