LTCG on sale of plot for joint owners

Tax queries 1870 views 2 replies

manish

author

68 Points Joined June 2010

Dear friends,

A & B were allotted a residential plot in February 2007. (registry still not done). They sell the plot in May 2010 for an amount of Rs. 1 crore.

How should they proceed further in order to avoid LTCG ?

Suppose A&B decide to purchase a residential plot costing Rs. 1 crore (in joint names). Whether they would be still liable to LTCG or they will have to do construction on the plot within three years?

If construction is a must to save LTCG, then how much construction?

Since the entire sale consideration has already been invested in the cost of the plot, whether A or B can do construction from his own funds?

please reply accordingly to the above questions.

thanks in advance

manish

Replies (2)

vishnupriya

CA Final

1418 Points Joined July 2009

In your case you got 2 options

1. U/s 54 EC amount invested in the specified bonds issued by REC or NABARD can be claimed as exemption for LTCG.They should be invested within 6 months of transfer to claim exemption.

2.U/s 54 F within a period of 1 year before or 2 years after the date of transfer, a residential house is to be purchased or within a period of 3 years after the date of transfer a residential house is to be constructed.

The cost of new residential house or LTCG whichever is lower is exempt from tax.

So simply purchasing a plot is not enough to get exemption.

If you purchase/sell any property in joint names, the percentage of share is considered.