manish (author) (68 Points)
27 June 2010Dear friends,
pls clarify the position in case of LTCG accruing to joint owners of a house property.
Whether the joint owners are required to invest jointly in a property to avail benefit of Section 54 or they can invest in two different properties in their individual names to the extent of their respective share in capital gains?
pls if possible support ur point by way of case laws.
regards
manish
Shanmuga sundaram
(Practising Chartered Accountant)
(46 Points)
Replied 27 June 2010
Hi Manish
There is no requirement that the joint owners should invest jointly inorder to get exemption from Capital gains. They can very well claim exemption by investing in seperate properties. If the one coowner does not invest he need to pay capital gains on his portion only.
manish
(author)
(68 Points)
Replied 28 June 2010
Hi Shan,
Thanks for ur reply. But can u support ur view point by way of a case law or judgment.
C.Balaji
(Learner)
(1867 Points)
Replied 28 June 2010
Dear Manish....
I dont know why you need case laws for this....
Joint owners of a Property will be assessed separately... Therefore the Joint owners can very well claim exemption by investing in seperate properties.... If one fails to invest before the specified period he need to pay tax on his portion (i.e. Capital Gain)....
Shudhanshu Agrawal
(Business)
(2570 Points)
Replied 28 June 2010
Agree with above replies. When you will sell the property in that case the amount of LTCG will be segregated between the joint owners according to their shares. Which means from now onwards they are seprate persons and hence provisions related to investment will be applied on the individual share.
manish
(author)
(68 Points)
Replied 28 June 2010
Dear friends,
thank u very much for the replies. Actually, i was given an impression everywhere that the new house is restricted only to one.
Anyway, the query is finally resolved because of all of you.
Let me explain the query in detail.
A & B are joint owners of a residential house. The residential plot was purchased in August 1998 and a house was constructed on the plot in February 2009. The contribution towards plot (Rs. 4,50,000)was made by both A & B in equal share. However, for construction purposes, A took a housing loan of Rs. 7 lakhs and he contributed his own funds to the tune of Rs. 1 lakh. No contribution was made by B towards the said construction. The EMI of the loan was was paid by A out of his own income.
The property was given on rent for 2009-10 and the rent received was deposited in joint account.
Now, A&B want to sell off the house property, which is expected to fetch around Rs.91 lakhs. Out of this, the housing loan liability is around Rs. 6 lakhs. The balance amount has to be utilized in a manner so as to save the capital gains tax. Total brokerage to be paid is Rs. 2 lakhs. My suggestion is as follows :-
1. The sale deed should clarify the consideration for land and house separately (83+8) (since land is a long term capital asset and house is a short capital asset). The brokerage should also be bifurcated in the ratio of 9:1 (90% towards land and 10% towards house) (1.80 lacs + 20000).
2. The sales proceeds (8lakhs - 20000 = 780000) of house should go to A as he has contributed solely to construct the said house and out of such sale proceeds, he can prepay the housing loan outstanding. The balance of Rs.20000 would be short term capital loss.
3. The sale proceeds (83-1.80000=81.20 lakhs) would be shared between A & B in equal ratio i.e. Rs. 40.60 lakhs each.
4. The LTCG would be around 8300000-180000-858974= 7261026
5. A & B's individual share would be Rs. 3630513
6. A & B can purchase their individual properties (two in number) costing Rs. 30 lakhs each.
7. The balance about Rs. 630000 can be invested by each of them in REC or NHAI bonds.
pls. tell me whether the above suggestion is correct or some modification is required.
regards
manish
GSTR 9 and 9C for FY 23-24 as amended by Notification 12/2024 dated 10th July 2024(with recording)
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