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Section 54 Income Tax act.

Basant (Legal) (95 Points)

03 August 2018

I and my wife have seperately made long term capital gains from listed shares which are now taxed at 10% over the grandfathered price of 31st Jan 18. I own only one residential flat in my single name, in which i live. My wife does not own any residential property. Can we buy a second residential apartment in both our names being 50 percent owners each and take benefit of section 54 and claim deduction? Please help and guide.

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (183197 Points)
Replied 03 August 2018

"Can we buy a second residential apartment in both our names being 50 percent owners each and take benefit of section 54 and claim deduction?"

No..... LTCG tax charged u/s. 112A, is at flat rate of 10% over gains, above Rs.1 lakh.

No exemption available under section 54.

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CA. Roopali Kadam (Jobs on assignment basis.) (1459 Points)
Replied 03 August 2018

Sec 54F benefit is for capital gains arising from the transfer of Long-term Assets. I couldn't find any exception in sec 54F or 112A... Unless I am missing anything, they can take benefit of Sec 54F.

Regards,

Roopali Kadam

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Basant (Legal) (95 Points)
Replied 04 August 2018

Thank you Roopali ji, I raised the query because as I read section 54F clearly states any gains arising out of any capital asset, stipulation being that entire sale consideration has to be utilised to buy the property and not being from accounts field i wasnt sure. Kindly advise whether we both can pool in the gains and purchase one home in both our names and claim the deduction, meaning it does not have to be seperate homes, right?

CA. Roopali Kadam (Jobs on assignment basis.) (1459 Points)
Replied 04 August 2018

54F is not for any capital gains, Only gains from Long-term Capital Assets will be considered.

As far as I understand yes you can pool your gains to invest in co-owned property.

Take expert advice.

Basant (Legal) (95 Points)
Replied 04 August 2018

Apologies Roopaliji, for the mistake. I did mean ltcg arising out of any capital asset, wrongly omitted the long term aspect since the discussion was regarding long term. Thank you for pointing out the error. Any recommended expert i could consult in Mumbai, please? Or maybe since i do plan to purchase the second home, i can just claim the deduction and if disallowed, take it further from there. I must congratulate you on your excellent grasp and sharp intellect ma'am. Thank you once again for your views.

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Nikhil Kaushik (Fellow CA) (86157 Points)
Replied 05 August 2018

Dear Basant,

you should be able to claim the deduction under 54F. make sure you follow the conditions provided therein. Given that 54F is a very restrictive clause and can be used by you only once at this stage (since you already own a flat), make sure that it is used only where the gains are substantial.