Go AD-Free with CAclubindia Pro and get a FREE CCI Coffee Mug. Subscribe Now!

Income tax capital gains exemption

Krishna Prasad (Partner) (260 Points)

20 December 2011

OUR CLIENT SOLD ONE RESIDENTIAL HOUSE AND OTHER LONG TERM CAPITAL ASSET OTHER THAN SHARES AND LIABLE TO CAPITAL GAINS TAX U/S.54 & 54F OF THE INCOME TAX ACT,1961. HE WANTS TO GET THE CAPITAL GAINS EXEMPTION BY PURCHASING OR CONSTRUCTING A NEW HOUSE WITH IN THE STIPULATED PERIOD AS PER THE PROVISIONS OF THE INCOME TAX ACT,1961. NOW THE QUESTION IS THAT WHETHER PURCHASE OF ONE NEW HOUSE CAN BE CLAIMED AS EXEMPTION FOR BOTH SEC-54&54F SIMULTANEOUSLY TO THE EXTENT OF THE NEW INVESTMENT. PLEASE SUGGEST ME.

Reply
Follow
Share

3 Replies

CA Shraddha (Mcom, CS Exe.) (Service) (224 Points)
Replied 20 December 2011

In my opinion, assessee can claim both the exemption i.e u/s 54 and 54F if conditions of both the provision are satisfied. The basic reason in this regard are as follows:

1. It is settled principal that section 54 and 54F are relief mechanism and therefore, if the conditions are fulfilled , the exemptions are allowable.

2. There is nothing in the Act that prohibits claim under section 54 & 54F simultaneoulsy. In fact , conditions under both the section is different and therefore both these provisions are for different situation. Hence , if conditions of the said provisions are fulfilled , claim of exemption shall lie. Further, anywhere in the above sections it is not stated that exemption claimed in respect of an asset under this section cannot be claimed under other section of the act.

However, it must be ensured that the total amount of exemption should not exceed the capital gain earned by the assessee.

Regards,

Shraddha

Upgrade to CAclubindia Pro. Subscribe Now!

CA Ketan Waghela (Partner at Elite Educare) (356 Points)
Replied 20 December 2011

Krishna ji,

The assessee can claim both the exemption on single new house, provided the conditions are satisfied.

e.g. Mr. X owns a self-occupied residential house and a plot of land. (he has no other house) he sells the house on 31.01.2007 for 6,50,000/-(purchased on 31.01.2002 for 4,00,000/-) and plot of land on 15.02.2007 for 5,00,000/- (purchased on 30.03.2002 for 2,00,000/-). He purchased a new residential house on 25.04.2007 for 5,00,000/-.

For calculation please find the attached file.