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Capital gain

Bhakti Maru (Taxation) (91 Points)

13 September 2019

My client is owning 4 residential property, out of which one property will b sold just after receiving possession in December 2019. (purchase agreement made in 2013) .another under construction property is bought in May 2018.

My query.
1. the property which will b sold will be long term capital asset?
2. how can I take benefits of exemption against property which was purchased in May 2018.

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7 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177896 Points)
Replied 13 September 2019

1. Yes, it will be LTCG over sale of rights in the property.

2. Not possible, against this sale.

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Bhakti Maru (Taxation) (91 Points)
Replied 13 September 2019

Can he claim exemption if he purchase commercial property ?
or is it advisable to buy another residential property?

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (177896 Points)
Replied 13 September 2019

Exemption against purchase of any commercial property is not at all eligible under any section.

But against purchase of any residential property in this case is also not possible, as he has more than 1 property at the time of sale of the property rights, and the claim would be u/s. 54F of the act.

Advised to get exemption u/s. 54EC.....ie. investment NHAI or REC capital gains bonds upto 50 lakhs.

sabyasachi mukherjee (27574 Points)
Replied 13 September 2019

You cannot take this benefit since Sec 54F applies to sale of capital asset.
The property to be sold does not posses ownership rights hence this benefit cannot be availed.

Suresh Thiyagarajan (Student) (3986 Points)
Replied 14 September 2019

1. Date of agreement will be taken as the date of purchase and in your case, it will be considered as LTCG ( as per latest ITAT judgment). When the sale is likely to take place on December 2019 of the property in which the possession is to be gained will be charged to tax as LTCG.
2. Exemption u/s 54 can be claimed by investing the sale consideration in another house property, 1 year before or 2 years after or 3 years in case of construction from the date of transfer.
3. In your case, if the sale is made on Dec 2019, then 1 year before will be Dec 2018, within this period another house property should have been purchased in order to claim exemption u/s 54. Since you have purchased an under constructed property in May 2018 this exemption will not be available. However, exemption u/s 54 can still be claimed if another residential property is purchased within 2 years or 3 years in case of construction within the date of transfer.
4. As explained above commercial property will not be covered under any exemption provision. Other options are to invest to the extent of Rs. 50 lakhs in bonds covered u/s 54EC.
please correct me if the above interpretation has an alternative view.

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Bhakti Maru (Taxation) (91 Points)
Replied 16 September 2019

Suresh sir I agree with you. Even I have this opinion. however dhiraj sir , I'd like to know why he cannot take exemption under sec 54. in that section there is no specification of number of house property at the time of sale.

Kapadia Pravin (17259 Points)
Replied 16 September 2019

May 2018 under construction Wala property sale will result into STCG and hence no exemptions.

2013 Wala property (of which possession is in Dec 2019) sale will result into LTCG and benefit under 54 possible as per re-investment period conditions. Also possible is 54EC benefit upto 50 lakhs.