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Capital Gain - sec 54

Soumya (Proprietor) (69 Points)

25 May 2011

I would like to know whether benefit of sec 54 can be availed in respect of long term capital gains arising from the sale of a residential house in India by a non-resident? Can the investment in the new house be available for purchase / construction of a new residential house outside India? Can the amount deposited in the Capital Gains Account Scheme be used to dierctly repatriate funds abroad for above purpose or whether it can be firstly transferred to the NRE A/c & then transferred outside India?

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CS,CA F,Numrologi TusharSampat (CS CA F Numerologist Astrologer Graphologist Face reader Vastu Expert) (85930 Points)
Replied 25 May 2011

Ans 1 since u/s 54 ther is no expressed restriction abt availability of exemption to NR....in ma opinion u may get the benefit.

Ans 2 In my view i think since evn u are a non residnt and getting d benefit u/s 54 bt will hve to purchase or construction in INDIA since ur original asset whic u sold was in india so on this basis u need to buy/construct in india only. n if u violate any conditon mentioned under sec 54 thn ull loose d exemption n will hve to pay tax on it.

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Soumya (Proprietor) (69 Points)
Replied 25 May 2011

Thanks Tushar.

However, regarding your Ans 2, pls clarify where is it stated that since the original asset was situated in India, the new asset is also required to be situated in India?

CS,CA F,Numrologi TusharSampat (CS CA F Numerologist Astrologer Graphologist Face reader Vastu Expert) (85930 Points)
Replied 25 May 2011

Reason -

Sec 54 uses the words"Long term Capital Gain arising frm transfer of Capital Asset being building or land appurtanent therto or residential house property income of whose is chargeable under the head INCOME FROM HOUSE PROPERTY' (for original asset sold)

its referring to house property income in india n since NR's income from House prprty frm Foriegn house in nt taxable in india so ull hve to buy /construct in india only for getting exemption under sec 54.

CA NITUL MEHTA (KPMG-Senior Consultant-International Tax ) (236 Points)
Replied 25 May 2011

The Mumbai Tribunal judgment in case of Mrs. Prema P Shah vs ITO 282ITR (AT)211 [2006] is significant in this regard. In fact , this order of Tribunal not only openly confirmed that the exemption u/s 54 is allowed even for purchase of residential house outside India , but also stated that in UK , even lease for 150 years can be considered purchase for the purpose of section 54 .

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