Ltcg exemptions

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

22 January 2014 Whether exemption from LTCG can be claimed for paying the installment of house purchased 3 years back from the date of sale ?

If yes, then under which section ?

Thanks in advance

@VaibhavJ

@VaibhavJ (Expert)
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22 January 2014 Your query is not clear can you pl give an example.

Thx

Querist : Anonymous

Querist : Anonymous (Querist)

23 January 2014 I have sold a residential plot in 2014. I want to claim exemption from these capital gains through the installments paid for the house purchased in 2010. Can I claim exemption from these capital gains if I am paying installments for the house purchased in 2010??

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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03 August 2024 To claim exemption from Long-Term Capital Gains (LTCG) for paying installments of a house purchased three years prior to the sale, you should refer to the provisions under Section 54 and Section 54F of the Income Tax Act.

### **1. Exemption under Section 54:**

**Section 54** provides relief from LTCG when the sale proceeds from a residential property are reinvested in another residential property. However, this section requires that the new house be purchased or constructed within the specified time limits. The key points are:

- **Purchase**: You must purchase the new house within one year before or two years after the date of sale.
- **Construction**: If constructing, the house should be completed within three years from the date of sale.

**Section 54** does not allow claiming an exemption for payments made towards a property bought before the date of sale. Therefore, payments for a house purchased in 2010 cannot be considered for exemption under Section 54 if the sale of the property was in 2014.

### **2. Exemption under Section 54F:**

**Section 54F** provides a similar exemption but applies to the sale of any long-term capital asset other than a residential house. It allows you to claim exemption if the sale proceeds are invested in the purchase or construction of a residential house. Key points include:

- **Purchase**: The new house must be purchased within one year before or two years after the sale of the asset.
- **Construction**: If constructing, it must be completed within three years.

**Section 54F** also requires that the entire capital gain be invested in the new house to get a full exemption. If the entire capital gain is not reinvested, the exemption is proportional.

### **Your Situation:**

Since you mentioned that the house was purchased in 2010, and you are selling the residential plot in 2014, the exemptions under Sections 54 or 54F cannot be applied for installments paid towards the 2010 house. The exemptions are specifically tied to the time frame relative to the date of sale, and only the purchase or construction of new property within the time limits specified can qualify for exemption.

### **Possible Solutions:**

1. **Investment in New Property**: To claim exemption under Section 54 or 54F, you should invest the sale proceeds in a new residential property within the specified time limits.

2. **Reinvestment of Capital Gains**: If you are looking to save on tax through reinvestment, you could look into:
- **Section 54EC**: Investing in capital gains bonds to claim exemption from LTCG.

3. **Consult a Tax Advisor**: For personalized advice and to ensure compliance with the tax laws, consult a tax advisor or a chartered accountant.

### **Conclusion:**

Exemptions under Sections 54 and 54F are specifically tied to the date of sale and reinvestment within the prescribed periods. Payments for properties purchased before the date of sale are not eligible for exemption under these sections.

If you need further assistance or have more questions, please let me know!