Long term capital gain exemption u/s 54f
This query is : Resolved
18 January 2011
X is having an open plot ,it was purchased in the year 1998.
Now X would like to sell it and purchase a flat . Presently X owned a flat and residing in it, now X is going to buy another one to claim the exemption from the LTCG u/s. 54f.
The 54f is some what confusing not clear. Please clarify my doubt., is X is eligible to claim exemption u/s54f.
Now X would like to sell it and purchase a flat . Presently X owned a flat and residing in it, now X is going to buy another one to claim the exemption from the LTCG u/s. 54f.
The 54f is some what confusing not clear. Please clarify my doubt., is X is eligible to claim exemption u/s54f.
19 January 2011
Possible, provided the net consideration is invested in another residential house either by way of purchase or construction with in the time frame prescribed in the said section.
19 January 2011
so even if you have one house owned then also you can claim the exemption provided you are complying with the time frame. the section is not clear on whether there is any restriction if you already have one house owned
19 January 2011
Somani Ji , Pl have a look at proviso (a)(i) to section 54F.
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20 January 2011
Dear Chakrapani
Can you please explain the implication of proviso (b) under the section 54F?
Proviso (a)i and (b) appear to be conflicting.
Also can you please clarify whether the LTCG exeption will be applicable if the residential house already owned is rented and shown under 'Income from House Property'. i,e the assessee has one residential house which is rented?
Thanking you in advance.
Can you please explain the implication of proviso (b) under the section 54F?
Proviso (a)i and (b) appear to be conflicting.
Also can you please clarify whether the LTCG exeption will be applicable if the residential house already owned is rented and shown under 'Income from House Property'. i,e the assessee has one residential house which is rented?
Thanking you in advance.
24 January 2011
Dear Chakrapani
Can you please explain the implication of proviso (b) under the section 54F?
Proviso (a)i and (b) appear to be conflicting.
Also can you please clarify whether the LTCG exeption will be applicable if the residential house already owned is rented and shown under 'Income from House Property'. i,e the assessee has one residential house which is rented?
Thanking you in advance
Can you please explain the implication of proviso (b) under the section 54F?
Proviso (a)i and (b) appear to be conflicting.
Also can you please clarify whether the LTCG exeption will be applicable if the residential house already owned is rented and shown under 'Income from House Property'. i,e the assessee has one residential house which is rented?
Thanking you in advance
03 August 2024
Certainly! Section 54F of the Income Tax Act provides for an exemption on Long-Term Capital Gains (LTCG) arising from the sale of a capital asset (other than a residential house property) when the proceeds are invested in purchasing or constructing a residential house property. However, the exemption is subject to certain conditions and exceptions, including the provisos you mentioned.
### **Understanding the Proviso (b) under Section 54F**
**Section 54F (1)**:
To claim the exemption, the taxpayer must:
1. **Not Own More Than One Residential Property**: At the time of sale of the asset, the taxpayer should not own more than one residential property, i.e., the residential property should be less than or equal to one. This is the key condition for claiming the exemption under Section 54F.
**Proviso (a)**:
This proviso deals with the timing and manner of investment in the new residential property to claim the exemption.
**Proviso (b)**:
This proviso addresses the scenario where the taxpayer already owns more than one residential property at the time of sale of the asset. It states:
- **Proviso (b) to Section 54F (1)**: The exemption under Section 54F will not be available if, at any time during the period of holding of the capital asset (before the sale), the taxpayer owns more than one residential house property.
### **Implications of Proviso (b)**
1. **Ownership of Multiple Properties**:
- **At the Time of Sale**: If you already own more than one residential property at the time of selling the asset, you will not be eligible for the exemption under Section 54F.
- **During Holding Period**: If you owned more than one residential property at any time before the sale, the exemption will not apply. This means that if you owned more than one residential property at any point during the holding period of the asset sold, the exemption is not available.
2. **Conflict with Proviso (a)**:
- Proviso (a) outlines the conditions for claiming exemption while Proviso (b) sets restrictions based on previous ownership.
- Proviso (b) effectively restricts the exemption if you have owned more than one residential property at any time during the holding of the asset being sold, not just at the time of sale.
### **Applicability When the Residential House Is Rented**
**Condition for Exemption**:
- The exemption under Section 54F will **not** be available if the taxpayer owns more than one residential property at any time during the holding period of the asset sold.
**Renting Out the Property**:
- **Ownership Status**: Whether the residential property is rented out or not does not affect the eligibility for the exemption under Section 54F. The critical factor is the number of residential properties owned at the time of sale and during the holding period of the asset.
**Implication**:
- **If you already own one residential property (which is rented out) and you buy a new property with the capital gains**, you would not be eligible for the exemption under Section 54F because you already own more than one residential property.
### **Conclusion**
The key takeaway is that to qualify for the exemption under Section 54F, you must ensure that you do not own more than one residential property at any point during the period of holding the capital asset. Renting out the residential property does not change this requirement.
If you have any more questions or need further clarification, please feel free to ask!
### **Understanding the Proviso (b) under Section 54F**
**Section 54F (1)**:
To claim the exemption, the taxpayer must:
1. **Not Own More Than One Residential Property**: At the time of sale of the asset, the taxpayer should not own more than one residential property, i.e., the residential property should be less than or equal to one. This is the key condition for claiming the exemption under Section 54F.
**Proviso (a)**:
This proviso deals with the timing and manner of investment in the new residential property to claim the exemption.
**Proviso (b)**:
This proviso addresses the scenario where the taxpayer already owns more than one residential property at the time of sale of the asset. It states:
- **Proviso (b) to Section 54F (1)**: The exemption under Section 54F will not be available if, at any time during the period of holding of the capital asset (before the sale), the taxpayer owns more than one residential house property.
### **Implications of Proviso (b)**
1. **Ownership of Multiple Properties**:
- **At the Time of Sale**: If you already own more than one residential property at the time of selling the asset, you will not be eligible for the exemption under Section 54F.
- **During Holding Period**: If you owned more than one residential property at any time before the sale, the exemption will not apply. This means that if you owned more than one residential property at any point during the holding period of the asset sold, the exemption is not available.
2. **Conflict with Proviso (a)**:
- Proviso (a) outlines the conditions for claiming exemption while Proviso (b) sets restrictions based on previous ownership.
- Proviso (b) effectively restricts the exemption if you have owned more than one residential property at any time during the holding of the asset being sold, not just at the time of sale.
### **Applicability When the Residential House Is Rented**
**Condition for Exemption**:
- The exemption under Section 54F will **not** be available if the taxpayer owns more than one residential property at any time during the holding period of the asset sold.
**Renting Out the Property**:
- **Ownership Status**: Whether the residential property is rented out or not does not affect the eligibility for the exemption under Section 54F. The critical factor is the number of residential properties owned at the time of sale and during the holding period of the asset.
**Implication**:
- **If you already own one residential property (which is rented out) and you buy a new property with the capital gains**, you would not be eligible for the exemption under Section 54F because you already own more than one residential property.
### **Conclusion**
The key takeaway is that to qualify for the exemption under Section 54F, you must ensure that you do not own more than one residential property at any point during the period of holding the capital asset. Renting out the residential property does not change this requirement.
If you have any more questions or need further clarification, please feel free to ask!
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