My father has 2 brothers (all senior citizens) and all have collectively decided to sell their joint property (ancestral property) for 24 lakhs {8 lakh each}
Now purchaser has given a cheque of Rs. 3Lakh today as advance and remaining on the deed of sale {5Lakh} around june/july 2021.
Now my question is.... this money is divided into 2 FYs... So how to show this 3Lakh advance while filing ITR for FY 20-21 or does he need to show the full transaction in the next FY (FY 21-22) when he will receive the full payment.
Also my father has a plot of land, can the capital gains amount (after CII) or the total amount of 8 lakhs can be used by him to construct a pucca boundary wall across the land and a house that will most probably be half constructed as in 8 lakhs its not possible to complete a RCC HOUSE along with pucca boundary wall.
Also my father doesn't have additional money to contribute for new house construction.... So is it allowed even if the house is half constructed and slowly in the near future we may build it bit by bit.
Kindly suggest... Thanx in adv and God bless :)
1. Amount of 3 lacs received is only advance and u need not pay anytax on that in this year. In next year when the sale deed is finalised, then only it will be treated as transfer of ur property and then only u r liable to Capital gains and u need to pay tax.
So U need not show anything about this 3 lacs in FY 2020-21 ITR. U need to show total 8 lacs in FY 2021-22 ITR.
2. As per Sec 54, construction of a residential house property should be made within 3 yrs to get exemption from capital gains. Now House property as per income tax act implies any building or land attached to it. And further Building means any structure with 4 walls and roof over it. To put it simply even a single room can be treated as House property for income tax purposes.
Now u need not fully construct a RCC house but make sure there must be atleast one newly constructed room in the half constructed house that is ready to move in. It's not required whether u r actually living or not but it should be liveable. Hope u understand what I'm saying. And if required u need to prove the cost of that room and pucca boundary wall cost equals the capital gain amount..
Plse message if u need further clarification..
CAclubindia
