Section 54F exemption

I purchased a flat under construction and took delivery of the same in the month of September 2016. I have a land (urban land) which I would like to dispose and repay the loan borrowed for purchase of flat. I have following queries:

1. While Sec 54F reads "construction within 3 years after date of transfer", will i be allowed to claim exemption under this section for construction that has got over within 1 year before date of transfer?

2. Will repayment of loan be construed as eligible deduction under Sec 54F?
Asked 9 months ago in Capital Gains Tax from Chennai, Tamil Nadu
Dear Sir,

1) The provisions of Section 54 F reads as under ;-
      
      The assessee has purchased, within one year before the date of transfer ; or
       2 years after the date of transfer or constructed within 3 years after the date of transfer.

In your case, you have not purchased but have constructed house property within one year before the date of transfer. Hence you will not be eligible to claim 54 F exemption

2) Purchase of one residential house property (subject to condition you do not have any other house) only is allowed as eligible deduction under sec 54F. Repayment of loan will not be eligible as deduction under Sec 54F.

Kindly revert in case of further queries

- CA B S Sridhar, Chennai
sridharca@gmail.com
B S Sridhar
CA, Chennai
43 Answers
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1) U/s 54F(1), "the assessee has, within a period of one year before ......purchased ....one residential house in India...". Thus if you are selling your urban land before September 2017, you will be able claim exemption u/s 54F, subject to fulfilment of other conditions as applicable to you.
2) The emphasis is on "purchased". So if you have purchased out of borrowed funds also and repay the loan, you will be able to claim exemption u/s 54F.
B Vijaya Kumar
CA, Hyderabad
767 Answers
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Sir you can get exemption for purchase of the flat itself as Section 54F also reads purchase of residential unit before 1 year from the date of transfer also qualifies for exemption U/s. 54F.

Thus you can pay the loan with the property to be disposed and take claim of 54F. 
Shyam Sunder Modani
CA, Hyderabad
1404 Answers
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Yes, the emphasis is on "purchased" and construction is not covered. Hence, you cannot claim exemption for the construction of house one year before the date of sale of your property.
B Vijaya Kumar
CA, Hyderabad
767 Answers
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No only purchase of Residential Property before one year of transfer is mentioned and not otherwise.
Shyam Sunder Modani
CA, Hyderabad
1404 Answers
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Hello Sir,

You will not be able to claim benefit u/s 54F since yours is not a purchase but a constructed property and the benefit of 1 year before the date of sale is applicable only to purchase.

Repayment of loan is not a deduction under any of the sections.

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
1900 Answers
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Hi,

The condition "one year before" is only for Purchase. That's very clearly worded in Section 54F.
Pradeep Bhat
CA, Bengaluru
367 Answers
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Hello Sir,

You said it right, if the house would have been purchased one year before the date of sale then you would have been in a position to claim the Tax Exemption benefit.

Regards
Keerthiga Padmanabhan
M.Com., CA, LLB
Keerthiga Padmanabhan
CA, Greater Mumbai
688 Answers
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