LTCG amount investment in the name of relative
This query is : Resolved
08 January 2017
If we sale 3 PLOTS and invest these money in purchasing a NEW PLOT for constrcting HOUSE in the name of MOTHER. Then exemption is available from all 3 sold plots or not from capital gains under any section. Can't we invest in the name of mother? Is it compulsory to invest the proceeds in our own name?
09 January 2017
This may be disallowed by the assessing office though there are some supporting judgments of Delhi HC in which they have allowed capital gain exemption even if investment is made in the name of wife or son but there is no supporting document in case of mother.
09 January 2017
Thank You sir,
Sir, Did IT act mentioned it somewhere in the act that investment is allowed in the name of RELATIVE out of CG proceeds or it is purely based on case to case basis judgement of courts.
And if they mentioned, then what is mentioned, Relative of spouce/son etc.
plc reply.
09 January 2017
*Relative or spouse/son
03 August 2024
In the context of Long-Term Capital Gains (LTCG) and the reinvestment of sale proceeds to claim exemptions under the Income Tax Act, here are the key points to consider:
### **Investment in the Name of a Relative**
**1. Provisions for LTCG Exemption:**
- **Section 54:** Under this section, an individual or a Hindu Undivided Family (HUF) can claim exemption from LTCG if they invest the capital gains in the purchase or construction of a residential property. The property should be purchased within 1 year before or 2 years after the date of transfer of the original asset or constructed within 3 years from the date of transfer.
- **Section 54F:** This section provides exemption for LTCG arising from the sale of any capital asset other than a residential property, provided the proceeds are used to purchase or construct a residential property within the specified time limits.
**2. Investment in the Name of a Relative:**
- **Section 54 & 54F Specifics:**
- The Income Tax Act does not explicitly mandate that the new property must be in the name of the person who is claiming the exemption. However, as per judicial precedents and clarifications, the property should generally be in the name of the person claiming the exemption.
- **Judicial Precedents:**
- Courts have generally interpreted the provisions to require that the property be in the name of the person claiming the exemption, which is typically the person whose name appears on the capital gains statement.
**3. Relative Definition:**
- The Income Tax Act does not specify that the property must be in the name of the taxpayer or their spouse/children only. However, the intention is that the property should be in the name of the person who is benefiting from the exemption.
### **Practical Implications:**
- **Investment in Mother's Name:**
- If you invest the sale proceeds in a property in the name of your mother, and if you are claiming the exemption, this could potentially lead to disqualification of the exemption claim. The general interpretation is that the exemption should be claimed by the person whose name is on the property.
- **Judicial Judgements:**
- There have been cases where exemptions were denied if the new property was not in the name of the person claiming the exemption. Therefore, it's generally advisable to have the property in the name of the individual claiming the exemption.
### **Conclusion:**
- **Investment Requirements:**
- For claiming exemptions under Sections 54 or 54F, the property should ideally be in the name of the individual claiming the exemption.
- **If Investing in a Relative’s Name:**
- You should be cautious as this might not qualify for exemption. Consult a tax professional or legal advisor to confirm if any recent rulings or case laws might provide more flexibility.
### **Recommendation:**
- **Consult a Tax Professional:**
- Given the specific nature of tax laws and their interpretation, it’s highly recommended to consult a tax advisor or legal professional who can provide guidance based on the latest rulings and your specific situation.
This ensures that your capital gains exemption claim is valid and compliant with current tax laws.
### **Investment in the Name of a Relative**
**1. Provisions for LTCG Exemption:**
- **Section 54:** Under this section, an individual or a Hindu Undivided Family (HUF) can claim exemption from LTCG if they invest the capital gains in the purchase or construction of a residential property. The property should be purchased within 1 year before or 2 years after the date of transfer of the original asset or constructed within 3 years from the date of transfer.
- **Section 54F:** This section provides exemption for LTCG arising from the sale of any capital asset other than a residential property, provided the proceeds are used to purchase or construct a residential property within the specified time limits.
**2. Investment in the Name of a Relative:**
- **Section 54 & 54F Specifics:**
- The Income Tax Act does not explicitly mandate that the new property must be in the name of the person who is claiming the exemption. However, as per judicial precedents and clarifications, the property should generally be in the name of the person claiming the exemption.
- **Judicial Precedents:**
- Courts have generally interpreted the provisions to require that the property be in the name of the person claiming the exemption, which is typically the person whose name appears on the capital gains statement.
**3. Relative Definition:**
- The Income Tax Act does not specify that the property must be in the name of the taxpayer or their spouse/children only. However, the intention is that the property should be in the name of the person who is benefiting from the exemption.
### **Practical Implications:**
- **Investment in Mother's Name:**
- If you invest the sale proceeds in a property in the name of your mother, and if you are claiming the exemption, this could potentially lead to disqualification of the exemption claim. The general interpretation is that the exemption should be claimed by the person whose name is on the property.
- **Judicial Judgements:**
- There have been cases where exemptions were denied if the new property was not in the name of the person claiming the exemption. Therefore, it's generally advisable to have the property in the name of the individual claiming the exemption.
### **Conclusion:**
- **Investment Requirements:**
- For claiming exemptions under Sections 54 or 54F, the property should ideally be in the name of the individual claiming the exemption.
- **If Investing in a Relative’s Name:**
- You should be cautious as this might not qualify for exemption. Consult a tax professional or legal advisor to confirm if any recent rulings or case laws might provide more flexibility.
### **Recommendation:**
- **Consult a Tax Professional:**
- Given the specific nature of tax laws and their interpretation, it’s highly recommended to consult a tax advisor or legal professional who can provide guidance based on the latest rulings and your specific situation.
This ensures that your capital gains exemption claim is valid and compliant with current tax laws.
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