• Long term capital gains tax

A plot in name of my mother in Delhi was sold through a registered power of attorney in Feb'2013 for 80 lakhs (same was bought in 1984) and subsequently another plot was bought in Noida in March 2013 in joint name of myself and my mother, sale deed executed and all payments made, however the registry was done in Dec'2013 and registry done for 77 lakhs.

Following clarification is requested: 
1. For calculation of the 3 year period within which the capital gain has to be reinvested, the start date shall be Feb 13 or March 13 or Dec 13.

2. Can capital gain be offset against the plot purchased or is it necessary to construct house, is there any way out of not constructing the house as the area in not livable yet.

Asked 4 years ago in Capital Gains Tax from New Delhi, Delhi

First of all in your case you are not eligible for capital gain exemption as the sale proceeds of one plot are invested in purchase of another plot. The capital gain exemption can be claimed only for purchase of construction of residential house property.

Swapnil Patil
CA, Navi Mumbai
30 Answers
4 Consultations

4.6 on 5.0

This case may be covered under section 54F of the Income tax act . The period of construction of 3 years starts from the date of transfer . Hence the period of 3 years will be counted from Feb 2013 .

Further the exemption is available only if you construct a new residential house within 3 years of such transfer . It can be supported with the fact that the house constructed is a residential house . Hence the house should be residential, but whether you are actually living or not is immaterial . You can use this house for rent purpose or keep it vacant .

Prakash Sinha
CA, New Delhi Area, India
120 Answers
17 Consultations

4.9 on 5.0

1. Considered from Dec - 2013

2. compulsory to construct house within 3 years.

Kavit Dilip Gadhia
CA, Mumbai
35 Answers

4.6 on 5.0

Since the plot is purchased in joint name, kindly share details of your mother's contribution. The balance amount of sale consideration may alternatively be invested in NHAI bonds or other approved investments in case you don't wish to purchase a property.

Shashank Surana
CA, Chennai
60 Answers
4 Consultations

4.3 on 5.0

Dear Sir,

I would like to answer your points first without referring to the above mentioned case and my opinion.

1. For calculation of 3 years period the start date will be Feb'13 as the relevant section says 3 years from the date of Transfer.

2. Capital Gain cannot be offset against the plot purchased and it is very much necessary to construct a house property.

Now in my opinion, as per the relevant section the assesse has a time period of 2 years to buy a house property and 3 years in case of constructing a house property. But in either case the Assesse has to deposit the Sale proceeds in a Long Term Gain Account Scheme before the due date of filing of returns for the relevant year which in your case was 31st July 2013, which I assume did not happen.

So it is again very unlikely for you to claim benefit u/s 54.


CA Rohit R Sharma


Rohit R Sharma
CA, Mumbai
2104 Answers
92 Consultations

5.0 on 5.0

1.For calculation of the 3 year period within which the capital gain has to be reinvested, the start date shall be Feb 13.

2.It is mandatory to construct the house. However for claiming exemption, Cost of the Plot can also be included.

Shyam Sunder Modani
CA, Hyderabad
1408 Answers
110 Consultations

5.0 on 5.0

I am not sure whether I understood your issue properly. It seems you sold the plot in the name of your mother through a GPA in Feb 2013 for Rs. 80 lakhs but the date of registration is not clear.

It also appears that you purchased another plot in March 2013 by making all the payments and even executing the sale deed in the joint name of yourself and your mother but this registration of this was done for Rs. 77 Lakhs in December 2013.

I hope my understanding is correct.

Now the following issues arise out of these transactions:

1 As the property was sold through a registered power of attoreny, the nature of power of attorney is important to determine whether there was any transfer of property on the execution of power of attorney. If the PA holder is only your agent, then the risks and rewards on the plot will be still with you till you actually transfer the property. If the PA holder acquired the property in his own right, then the property can be considered to be transferred to the PA holder in Feb 2013 itself. In such case, you will have to compute long term capital gains with the date of acquisition being in the year 1984 and the date of sale being in Feb 2013. In such case the start date will be from Feb 13 itself.

2 You have invested the sale proceeds in the new house in March 2013. Though you did make the investment, your construction should be completed within 3 years from Feb 2013. If the construction is not completed because it is not livable yet, you lose the exemption. Perhaps one solution could be to give it for construction to a co-operative society under self financing scheme and have a letter of allottment. Allotment of a flat under the self financing scheme of a co-operative society or other institution is treated as construction of the house as per Circular No. 471 dated 15th October 1986 and 672 dated 16th December 1993.

3 The new house shall be registered in your name and your mother can be a joint holder.

B Vijaya Kumar
CA, Hyderabad
891 Answers
67 Consultations

5.0 on 5.0

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