• Applicability of 54 / 54F

We are two brothers and two sisters 
We inherited the residential property in which we were living from our mother.
The property was purchased in 1978.
In Dec 2016 we entered into JDA with the builder for development of the property.
We vacated the property in April 2017 and handed over the property with building along with appurtenant land to the builder.
Each one of us will be getting two flats and cash consideration worth 15 lakhs paid in isntallments upto Dec 2017 .
The completion certificate is expected in July 2018 i.e. this month.

I would like to know which CG exemption rule is applicable in our case 54 or 54F?
In which assessment year the capital gains must be computed and IT returns filed AY18-19 or AY 19-20?
Under present rules can each of us get exemption for the two flats or only one.
If any other information is required the same can be provided
Asked 5 years ago in Capital Gains Tax

Hi,

CG exemption rule is applicable in our case 54 because Long term capital gains arising from a residential property

The capital gains must be computed and IT returns filed for AY18-19. It should be considered from date of sale agreement

No, you can get exemption only for amount invested in one residential property.

Section 54:

This is the section for availing tax benefit on long term capital gains arising from a residential property. Under this section if a residential house is sold after three years of purchase then one can avail tax exemptions on the gains by investing them in following options –

A new residential property either bought within two years or constructed within three years from the date of transfer of existing property. In the case of buying a new property, the exemption is available even if it is bought within one year before the date of transfer.

There might be a situation when you would not have decided on a new property but do not want to lock in the money in the bonds. In such instances, the money has to be deposited in a Capital Gains Account Scheme.

The entire capital gains will be exempted where the amount of investment in new property is equal or greater than the capital gains earned.

One of the larger benefits of Section 54 is that one can hold a number of properties as on the date of transfer and still claim exemption on the gains.

Thanks & Regards,

Payal Chhajed

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

HI,

You have transferred the property to builder and got 2 flats and a 15 lac amount back in July 2018, so it is income of the AY 2019-20, however since the transfer of property has happened in the last year, teh gains are to be taxed in the previous only, AY 2018-19. It is more of an exchange of 2 flats +15 lacs against your share of cost. So drop exemption from your mind. You need to tax the following:-

FMV of the new falts received +15 lacs cash

- Indexed value of cost or FMV (1st april 2001) of the your share in the property

- indexed cost of improvement, if any

- selling expenses

Taxable Capitals gains

I don't think that you should be having any taxes in the above but still get it done. You will need a valuation certificate for the above. Please feel free to connect with us for that.

Thanks

Damini

Damini Agarwal
CA, Bangalore
405 Answers
31 Consultations

5.0 on 5.0

Section 54

Exemption for residential house

LTCG(Long term capital gain) on transfer of residential house shall be exempt if the amt. of capital Gains is utilised for purchase/construction of new residential house within the following time limit.

TIME LIMIT

The new house should be purchased within 1 year before the date of transfer or 2 years after date of transfer or it should be constructed within 3 years of transfer.

SCHEME OF DEPOSIT

If the new asset is not acquired upto the due date of filing return then the assessee should deposit the desired amount in a special account opened in accordance with capital Gains accounts Scheme, 1988.

The deposit amt. is not utilised then the exemption allowed shall be withdrawn.

AMT OF EXEMPTION

1) Amt. of only Long term Capital Gains

2) Cost of New Asset/Amt. deposited

LOCK IN PERIOD

The new asset should not be transferred within 3 years from the date of its purchase. If the new asset is transferred within 3 years then the exemption will be withdrawn.

for the purpose of computing the capital gains on transfer of such property for redevelopment, the sale consideration shall be the stamp duty valuation of the new property on the date of issue of such completion certificate. In case any cash compensation is also received in addition to the new house, the same shall be added to the stamp duty valuation of the new house and the aggregate shall be taken into account for computation of capital gains.

IN YOUR CASE, YOU VACATED PROPERTY IN APRIL 2017 AND COMPLETION CERTIFICATE RECEIVED IS RECEIVED IN JULY 2018 I.E. IN LAST YEAR. ACCORDINGLY CAPITAL GAIN EXEMPTION NOT AVAILABLE. IT The gain is of AY 2018-19. YOU WILL GET EXEMPTION ONLY ONE FLAT

Ajit Kumar Jain
CA, Mumbai
26 Answers

5.0 on 5.0

1. 54

2. AY 18-19

3. No, only for one flat.

First calculate your capital gain/loss amount, then invest accordingly.

Karishma Chhajer
CA, Jodhpur
2450 Answers
29 Consultations

5.0 on 5.0

I would like to know which CG exemption rule is applicable in our case 54 or 54F?

ans. yes exemption u/s 54 is applicable in all of your case

In which assessment year the capital gains must be computed and IT returns filed AY18-19 or AY 19-20?

ans. in case of joint development agreement

A. FROM THE ASSESSMENT YEAR 2018-19 CAPITAL GAIN TAX LIABILITY ARISE ON THE DATE OF

COMPLETION CERTIFICATE RECEIVED FROM COMPETENT AUTHORITY

B. BEFORE 1-4-2017 DATE OF TRANSFER OF PROPERTY

Under present rules can each of us get exemption for the two flats or only one.

ans. UNDER SECTION 54 ONLY 1 FLAT IS ALLOWED, BUT IF SALE DEED IS MADE JOINT FOR BOTH FLATS AND FLATS ARE ALSO JOINT THEN ALLOWABLE.

If any other information is required the same can be provided

Bhadresh S Mevada
CA, Surat
49 Answers

Not rated

Dear Sir,

Capital gain will be calculated in the A.Y. 2019-20 as you will receive completion certificate in the F.Y. 2018-19. Each one of you can avail exemption under 54 for your one flat only.

Thanks

Vivek Kumar Arora
CA, Delhi
4825 Answers
1030 Consultations

5.0 on 5.0

Hi,

1. Sec 54 will be applicable in your case.

2. AY 19-20

3. Exemption will be available for only 1 flat

Regards,

Nikhil.

Nikhil Khanna
CA, Mumbai
1429 Answers
19 Consultations

4.8 on 5.0

Hi,

Section 54 is applicable in your case.

Since you have not shown capital gain in FY 2016-17, it's better you show it in the year of completion I.e. AY 2019-20.

Each of you can get exemption only for one flat of your choice.

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

Hi

Ideally, your capital gains were taxable in AY 17-18 only as your JDA fell into pre amendment period wherein capital gains were taxable in the year of entering into JDA.

However, since you have not done so, all you can do is charge tax on capital gain according to the new amended law.

As per the new law, capital gains are chargeable in the year of completion. So it would be AY 19-20.

You can claim exemption under section 54 in respect of investment in one flat only.

Lakshita Bhandari
CA, Mumbai
5687 Answers
908 Consultations

5.0 on 5.0

Hi

Sec 54 will be apply in your case,Exemption can be claimed for only one flat.

It will now be taxable in year of completion that is AY 19-20.

Swati Agrawal
CA, Mumbai
1146 Answers
7 Consultations

5.0 on 5.0

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