• Relief on long term capital gains if gain is more than Rs 2 Cr

1.	In the year 2003 we bought a piece of residential land in Bangalore for Rs 7 lacs. This was bought jointly by me and my wife. Both of us paid Rs 3.5 lacs each and accordingly the Sale Deed was registered.

2.	In the year 2007 we built an independent house on this land. The cost for construction was Rs 23 lacs which were largely paid by me.

3.	We have been living in this independent house since 2007. We have been paying Municipal Tax since 2007 and the receipt shows both of us owners. So does the Electricity and Water bill.

4.	Now that the children have settled and moved away we would like to shift from this independent house to a flat. 

5.	We would like to sell the independent house and buy a flat. Initial findings suggest that the market value of this independent house will probably be Rs 3.00 crore to Rs 3.50 crore.

6.	Even after indexation we expect the LTCG to be Rs 2.40 crore to Rs 3.00 crore.

7.	I understand that Capital gains exemption under Section 54 can be claimed if the capital gain does not exceed Rs 2 crores. 

8.	In our case it will most certainly exceed Rs 2 crores.

I seek your advice as to what is the best option to seek relief under Long Term Capital Tax for us.
Asked 4 years ago in Capital Gains Tax

No sir you can claim as much relief you want in section 54.

The new amendment suggest that if you have gain below 2 crore you can invest in 2 houses but if the gain is above 2 crore you can invest only in single house it no where disallows anyone whose capital gain is above 2 crore to invest in new house.

 

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you.

Naman Maloo
CA, Jaipur
4265 Answers
96 Consultations

5.0 on 5.0

- Limit of Rs.2 cr is for investment in two houses which is available once in a life time. In your case, you can claim the exemption for the whole amount subject to the cost of the new house.

Vivek Kumar Arora
CA, Delhi
4825 Answers
1031 Consultations

5.0 on 5.0

Hi

 

The exemption shall be provided. The limit of 2cr is for investment in two house properties.

Lakshita Bhandari
CA, Mumbai
5687 Answers
909 Consultations

5.0 on 5.0

- Both owners needs to mention the capital gain separately in their ITR's and claim the benefit of TDS deducted on the PAN of each.

- Both the owners are separately eligible for exemption u/s 54.

- Exemptions is available for the long term capital gain. If the gain is more than cost of the investment in the new house property then upto the amount of the gain otherwise the amount of whole capital gain is exempt.

Vivek Kumar Arora
CA, Delhi
4825 Answers
1031 Consultations

5.0 on 5.0

As you have mentioned capital gain would be around 2.4 crore so each owner needs to invest 1.2 crore each to save capital gain.

Naman Maloo
CA, Jaipur
4265 Answers
96 Consultations

5.0 on 5.0

- Both can invest in a single house or separate house.

Vivek Kumar Arora
CA, Delhi
4825 Answers
1031 Consultations

5.0 on 5.0

Yes, both the owners can claim the exemption under section 54 for reinvestment in another residential house property.

 

Both the co-owners can invest jointly in one residential house property to claim capital gain exemption.

Lakshita Bhandari
CA, Mumbai
5687 Answers
909 Consultations

5.0 on 5.0

Dear Sir,

 

Hope you are doing well !!

 

The exemption will be available.

 

However, the limit is Rs 2 Cr for investment in two residential property.

 

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Yes, both owners claim relief from LTCG.

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

Both the owners can invest the amount upto Rs 2 Cr in single house or separate house to get capital gain exemption u/s 54.

Payal Chhajed
CA, Mumbai
5188 Answers
288 Consultations

5.0 on 5.0

 

Yes, you both can claim exemption to the extent of your share of ownership of house.  IN such case, both of you have to make separate investment in eligible asset / scheme to the extent of capital gains for claiming exemption. 

You firstly need to determine the percentage of ownership in each of your hands – this can be done by checking the extent of cost incurred by each of you to purchase / construct the house. 

In each of  your hands, the capital gains would be the share of sale price less the indexed cost of acquisition. Indexation is to be done for the year you constructed the house. Indexation for land can be taken separately from the year you own land.  The cost would be the actual cost as incurred to buy that property.  Indexation is a cost inflation index which is notified by the Govt. It is done to adjust for inflation over the years. This increases one’s cost base and lowers the capital gains. Capital gains = sale price -  indexed cost of acquisition – any other expenses incurred for executing sale. You can add the registration cost to your purchase price. The indexation are notified values and you need to consider the same for the year you acquired the house and sale the house.

You can invest capital gains for purchase of another house to save tax. The investment can be made jointly also and claimed in your tax filings to the extent of your share of gains.  You should purchase a residential house either 1 year before the date of sale or 2 years after the date of sale. In case of constructing a house, you have to construct the residential house within 3 years from the date of sale. Until such purchase, the gains can be deposited in a PSU bank or other banks as per the Capital Gains Account Scheme, 1988. This deposit can then be claimed as an exemption from capital gains, and no tax has to be paid on it. However, if the money is not invested, the deposit shall be treated as capital gains in the year in which the specified period lapses. Kindly ask the buyer to deduct taxes in your respective share of gains, so that you guys can claim credit correctly.  I believe in individual share the gains would be less than 2 crore and hence not applicable to you.

Jasmina Jain Shah
CA, Greater Mumbai
454 Answers
4 Consultations

5.0 on 5.0

Hello,

 

The exemption u/s. 54 would be available.

The Limit of Rs. 2 Crores is for investment in two houses.

I hope this answer satisfies your requirement.

 

Regards,

CA Hunny Badlani

Hunny Badlani
CA, Madhya Pradesh
2608 Answers
16 Consultations

5.0 on 5.0

Yes, you both can claim exemption u/s. 54 to the extent of your capital gain and investment in new property.

Hunny Badlani
CA, Madhya Pradesh
2608 Answers
16 Consultations

5.0 on 5.0

Hello Sir,

 

The benefit of rollover of capital gains under Section 54 of the Income Tax Act is increased from investment in one residential house to two residential houses for a taxpayer having capital gains up to ₹2 crore".

 

The limit is applicable for individual wise i.e. 2 cr for each person.

 

So, you and your wife can take the benefit of amendment.

 

The exemption will be provided in your case.

 

 

 

Karishma Chhajer
CA, Jodhpur
2450 Answers
29 Consultations

5.0 on 5.0

Yes, you both can claim exemption individually.

 

 

 

 

Karishma Chhajer
CA, Jodhpur
2450 Answers
29 Consultations

5.0 on 5.0

Yes, you both can claim exemption individually.

 

 

 

 


Thank you for your kind words.

 

Yes, this would mean that assuming LTCG is Rs 3.60 crore both you and you wife can invest Rs 1.80 crore each and claim full benefit of Sec 54.

Karishma Chhajer
CA, Jodhpur
2450 Answers
29 Consultations

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