1. You won't get exemption on purchase of house property as To claim exemption under section 54, the taxpayer should purchase another house within a period of one year before or two years after the date of transfer of old house.
Under Section 54 the IncomeTax Act, an individual or HUF selling a residential property can avail tax exemptions from Capital Gains if the capital gains are invested in purchase or construction of residential property. Taxpayers such as partnership firms, LLP’s, companies or any other association or body cannot claim tax exemption under section 54.
The conditions that need to be satisfied to avail the benefit of the said section are as follows:
- Asset must be classified as a long-term capital asset.
- The asset sold is a Residential House. Income from such a house should be chargeable as Income from House Property
- The seller should purchase a residential house either 1 year before the date of sale/transfer or 2 years after the date of sale/transfer. In case the seller is constructing a house, the seller has an extended time, ie. the seller will have to construct the residential house within 3 years from the date of sale/transfer. In case of compulsory acquisition, the period of acquisition or construction will be determined from the date of receipt of compensation (whether original or additional compensation)
- The new residential house should be in India. The seller cannot buy or purchase a residential house abroad and claim the exemption.
The above conditions are cumulative. Hence, even if one condition is not fulfilled, then the seller cannot avail the benefit of the exemption under Section 54.
With effect from Assessment Year 2020-21 corresponding to FY 2019-20, a capital gain exemption is available for purchase of two residential houses in India. However, the exemption is subject to the capital gain not exceeding Rs 2 crore. Also, the exemption is available only once in the lifetime of the seller.