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Section 54f, construction of new house after demolishing old house

Satish (Work) (111 Points)

27 June 2018

If land along with a very old house thereon is bought and claimed under sec. 54F, then within a month demolished and a new house is constructed for residence on the same land, will the deduction still be valid?

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9 Replies

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (178001 Points)
Replied 27 June 2018

Subject to construction of new house completed within 3 years from transfer of original asset.....

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Satish (Work) (111 Points)
Replied 27 June 2018

Thanks Sir.

Land + house bought before completion of 2 years from the date of transfer of capital asset.

But only about 11 months left until the completion of 3 years from the date of transfer of capital asset.

So have to complete construction and obtain completion certificate within such 11 months?

Is there any other away?

Satish (Work) (111 Points)
Replied 28 June 2018

From 54F:

"and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date [constructed, one residential house in India] (hereafter in this section referred to as the new asset)"

New asset (land + residential building) purchased within 2 yrs. from the date of transfer of original capital asset. Deduction claimed.
Now want to demolish existing old residential building and construct new residential building.

And that also needs to be done within the said 3 yrs. time limit from the date of transfer of original long term capital asset?

From 54F:

"(3) Where the new asset is transferred within a period of three years from the date of its purchase or, as the case may be, its construction, the amount of capital gain arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such new asset as provided in clause (a) or, as the case may be, clause (b), of sub-section (1) shall be deemed to be income chargeable under the head "Capital gains" relating to long-term capital assets of the previous year in which such new asset is transferred."

What is the meaning of "its construction"?
Does it mean that, if the existing old residential building is demolished and a new residential building on the same plot of land gets constructed, deduction would be disallowed?

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (178001 Points)
Replied 28 June 2018

If you want to demolish and contruct new house, 11 months is the time left. But if you want to renovate existing house......... no time limit !!!

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Satish (Work) (111 Points)
Replied 28 June 2018

Thanks for the reply Sir.

But after 3 years from the date of purchase of new asset (land + residential building), I can demolish + construct or, sell that asset and deduction won't be disallowed, right?

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (178001 Points)
Replied 28 June 2018

Right, the restriction is only for 3 years from purchase of new house property.

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Satish (Work) (111 Points)
Replied 28 June 2018

Thanks again Sir for all the clarifications... YOU ARE THE BEST!

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Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (178001 Points)
Replied 28 June 2018

Thanks.........

God is Great........

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swapnil harwani (article) (72 Points)
Replied 14 January 2021

Hello, I have sold 1 plot. Can I now claim 54F exemption by investing the Gains in Purchasing the new plot on which I m planing to construct HP in next 1 year?