• Exemption under section 54F

Hello

One of my friend is selling plot and he is earning long term capital gain tax.He wants to save tax under section 54F by investing in residential house property.He is already joint owner in a residential property.Can he still avail section 54F exemption as he is already owning one house property.
Asked 7 years ago in Capital Gains Tax

If he is already owning a residential property, he cannot claim exemption u/s 54F.

B Vijaya Kumar
CA, Hyderabad
1001 Answers
124 Consultations

5.0 on 5.0

Hi,

Section 54F is applicable only if the person does not own more than one house (Other than the new house proposed to be purchased or constructed).

So, if your friend is owning only one more house, then he can claim Section 54F Exemption.

Alternatively, he can opt for Section 54EC Bonds up to Rs. 50 Lakhs to save Capital Gain Tax.

Pradeep Bhat
CA, Bengaluru
542 Answers
94 Consultations

5.0 on 5.0

Under Proviso (a)(i) to Section 54F.

For your ready reference, I'm quoting the relevant part of the proviso.

" Provided that nothing containing in this sub-section shall apply where-

(a) the assessee

(i) owns more than one residential house,other than the new asset on the date of transfer of the original asset;"...

The meaning of the word "owns" was discussed by Madras High Court in the case of Dr. (Smt.) P.K. Vasanthi Rangarajan v/s. Commissioner of Income Tax: (2012) 23 taxmann.com 299 (Madras High Court). You may find this case useful for your purpose. One of the links to this case is http://asmlegal.blogspot.in/2012/07/assessee-cannot-be-denied-exemption-us.html

In this case, joint ownership was allowed by the Madras High Court. However, in this case, the joint ownership is between Husband and wife with equal shares and both of them transferred their property under JDA. Hence, it is reasonable that both of them should not be denied exemption u/s 54F on the ground of joint ownership.

This decision is not binding on IT Authorities in other states.

B Vijaya Kumar
CA, Hyderabad
1001 Answers
124 Consultations

5.0 on 5.0

Hello Sir,

If your friend is an owner in only one house property other than the new property he is willing to invest, then he shall claim the benefit u/s 54F.

Trust this clarifies your query.

Feel free to call / get back in case of further clarifications.

Thanking You.

Regards,

Rohit R Sharma

BCOM, ACA, LLB-GEN, CERT. FAFP

Rohit R Sharma
CA, Mumbai
2104 Answers
95 Consultations

5.0 on 5.0

Yes he can still claim exemption U/s. 54 as he is owner of only one house on the date of transfer. He can avail the exemption by investing in the Residential property.

Shyam Sunder Modani
CA, Hyderabad
1408 Answers
164 Consultations

5.0 on 5.0

Dear Sir,

If he is the owner in only one house, he can claim the exemption u/s 54F subject to the other conditions being satisfied.

Please feel free to call/revert in case you need further guidance.

Thanks and Regards,

Abhishek Dugar

CA CS B.Com

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

hi,

please find the same as requested-

54F. Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house.- (1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), 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, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,—

(a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45 ;

(b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45:

Provided that nothing contained in this sub-section shall apply where—

(a) the assessee,—

(i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or

(ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or

(iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and

(b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head “Income from house property”.

Explanation.—For the purposes of this section,—

“net consideration”, in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.

(2) Where the assessee purchases, within the period of two years after the date of the transfer of the original asset, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head “Income from house property”, other than the new asset, 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 residential house is purchased or constructed.

(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.

(4) The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilised by him for the purchase or construction of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139 in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit ; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset :

Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase or construction of the new asset within the period specified in sub-section (1), then,—

(i) the amount by which—

(a) 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 the new asset as provided in clause (a) or, as the case may be, clause (b) of sub-section (1),

exceeds

(b) the amount that would not have been so charged had the amount actually utilised by the assessee for the purchase or construction of the new asset within the period specified in sub-section (1) been the cost of the new asset,

shall be charged under section 45 as income of the previous year in which the period of three years from the date of the transfer of the original asset expires ; and

(ii) the assessee shall be entitled to withdraw the unutilised amount in accordance with the scheme aforesaid.

Vishakha Agarwal
CA, Bangalore
448 Answers
85 Consultations

5.0 on 5.0

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