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Capital gain on sale of joint property

Lena (12 Points)

26 August 2018

R has a vacant plot in West Chennai purchased in 1975.

N his elder brother has a residential house with land in east chennai purchased in 1974.

Supposing R executes a gift /settlement deed in favour of his elder brother N and his daughter L with equal share in Land.

If the property is sold jointly and N utilizes his share of sale proceeds for construction of 2 flats in one floor (by demolishing the old house) in Chennai and L wants to reinvest her share for purchase of a flat in Cochin - whether both will be exempted from LTCGT for amount reinvested by them. Is there any restriction that both should construct or purchase residential unit in one floor at the same premises.

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7 Replies

Gauthami (Student CA Final ) (431 Points)
Replied 26 August 2018

since property is sold and capital gains arised such CG shall be taxable in hands of both L and equally. As N is willing to use such gains for construction of house, his capital gains shall be exempt if cost of construction of new house is more than capital gains n the house should be constructed within 3 yrs from the date of transfer
Incase of L if she invests CG in shares she cannot claim exemption. instead she can deposit the same in capital gain account scheme n use it before completion of 2 yrs from date of transfer so that amount shall be exempted.
there is no restriction that both should purchase or construct residential unit in one floor at same premises

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rama krishnan (12239 Points)
Replied 26 August 2018

there's no precondition that the both the co owners should purchase or construct residential property in the same location to claim 54f deduction

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Lena (12 Points)
Replied 26 August 2018

Thank you Sir. As regards L the query is not regarding investment in shares. But for reinvesting her share of the capital gain for purchase of flat in Cochin. Can she do it after sale of joint property within 2 years itself.