Comments on: S. 54F Exemption if house construction not completed within 3 Years?

By: Vimlesh

Vimlesh — Thu, 17 May 2012 07:08:57 +0000

Can anyone suggest me as to whether purchase of house property by way of allotment letter without any purchase agreement can be considered as date of acquisition for purpose of calculation of capital gain under income tax act, 1961and also provide me supporting case laws…..

By: Ashish

Ashish — Mon, 16 Apr 2012 15:08:47 +0000

Hi,

I had bought a house in Noida in 2008 with a home loan of 25 lakhs
spread over a period of 20 years. The amount of the loan was disbursed
by the bank in March 2008 while I took the possession of the house in
Feb 2012 after a delay of more than 1 year from the builder’s side.

Can I claim the IT rebate for the interest component of 1.5 lakhs
considering that there is a difference of more than 3 years between
the time the loan was disbursed and the possession of the house was
undertaken OR i can take only 30 thousand rupees benefit for the
interest component ?

By: Anish Bansal

Anish Bansal — Tue, 03 Apr 2012 07:27:58 +0000

Hi Gurus,

I have booked one flat with full payment in January 2010 and posession is not got till yet and builder says he will provide the posession in another 1 year. i have sold one ommercial property which i hold since far long in Dec’2011. Value of purchase i made in 2010 and sale in 2011 is same. Can i take benefit of section 54 for this investment.
if not then whatif i book a new flat for which payment will be made in form of installments of every 3 months. Can i keep the money in my normal saving account till the full payment is made or i have to open capital gain account.

thanks in advance.

By: C.T.SRIDHAR

C.T.SRIDHAR — Tue, 06 Mar 2012 10:30:39 +0000

I am one of the tax consultant, based at chennai. One of my client had sold her residential property and invested the capital gain in Capital Gain Scheme Account with Bank of India for a term of 3years. Since she is already 65yrs old, she is not going to buy any new property. Her income is only interest on such deposit. As per section 54 if any money invested in Capital Gain scheme account with the bank should be utilised on or before 3 years from the date of transfer of such residential property. Can you please inform me, if she will not utilise such amount then what will be the position under Income-tax Act, when 3years time elapse.

By: Maheswaran

Maheswaran — Sat, 26 Nov 2011 18:44:14 +0000

Sir,

It gives good in-sight of many scenarios faced w.r.to the sec54 exemption.Please clarify for my scenario as under:

In July’11 I sold (executed sale deed)of my commercial office space which I was holding for more than 3 years.Before the said sale,I already booked an under construction flat in Nov’09 (date of allotment letter) which was registered in Jan’2010 (on which date about 50% of the total amount was already paid to the builder)and the flat is still in under construction stage in Nov’11 which is expected to get OC and delivered for actual posession in Mar’12.

Under the above circumstances, am I eligigible to get 54F exemption, as wthin 3 years from Nov’09,I have got the OC & posession of the fully constructed house.Will the booking date of Nov’09 of the residential flat, which is actually **prior and not after ** the sale deed of commercial office prohibits me from getting the 54F exemption??

Many thanks once again

Maheswaran
27 Nov’11

By: veer singh

veer singh — Fri, 29 Jul 2011 07:10:35 +0000

we had sold the house property in the AY 2011-12 and amount of capital gain on house property invested to purchase a land but construction not completed with on this land in 3 year. so in this case what will be tax treatment.

By: Natasha Mehra

Natasha Mehra — Mon, 25 Jul 2011 12:15:27 +0000

I was allotted a pre-construction property in India in 2006. I paid monthly installments for about a year. It got completed and I got the possession only towards the end of 2009. Seems like from your article, one can argue that the date of 2006 should be considered to determine whether it is a LT or ST capital gains scenario.
Can you please clarify? Great article !!

By: Krishna

Krishna — Wed, 29 Jun 2011 10:16:08 +0000

Excellent article. can I have your contact information. I have a similar case and I am going for appeal. want to seek your guidance.

regards,
Krishna

By: Nihit Dalmia

Nihit Dalmia — Wed, 08 Jun 2011 14:40:13 +0000

Hello Sumit, even if cost of shares is nil, then also capital gains cannot amount to Rs.15 lakhs, it is not possible to assume such situation. If you will invest the sale consideration received from sale of shares into purchase/construction of house property, there will be no capital gains tax under exemption from section 54F. So, how can we assume that you have capital gains tax of Rs.15 lakhs, it is absurd.

Now, you need to invest entire 15 lakhs into purchase 1 year before or 2 years after date of transfer of asset(i.e. date on which your asset was sold) or 3 years in case of construction.

Since you have paid only 4 lakhs out of your sale consideration, you will get exemption proportionately under section 54F. You will not be entitled to full exemption.

Reason: Loan amount does not satisfy condition of payment from sale consideration. But suppose, you pay off the loan within 3 years from date of transfer(i.e. when you sold your asset), then you will be eligible, as you have ultimately paid your sale consideration received towards loan disbursement.

By: Nihit Dalmia

Nihit Dalmia — Wed, 08 Jun 2011 13:51:27 +0000

You have sold flat on 10 March 2009. You want to Purchase Flat on 2 Feb 2011. You can purchase a ready flat upto 10 March 2011. You can purchase a flat under construction upto 10 March 2012.

Now, since the expected date of construction is Dec 2011, you are very well covered under 3 years of construction.

Please take care of following things –

1. Get Allotment letter immediately on purchase of an under construction property.
2. Check that you have invested maximum amount of your sale consideration(i.e. the amount you received on sale of your old flat) into your new flat before 10 March 2012.

Now, in case, the builder is unable to provide the possession on or before 10 March 2012, you will still be eligible for section 54F exemption under capital gains.

Concl: You are eligible for 54F exemption

By: SHARAD MOHAN

SHARAD MOHAN — Tue, 01 Feb 2011 12:08:28 +0000

i have a query. i had sold my flat on 10 march 2009 and am NOW (2nd feb 2011) going ahead for buying an under construction property which is expected to be completed by end 2011.

will i be entitled to the tax benefit under 54.

rgds..sharad

By: Sumit

Sumit — Tue, 13 Apr 2010 03:36:36 +0000

Thanks for such wonderful information.

I have a question on Section 54F exemption. In case where the assessee buys a residential property by taking a loan, will such purchase qualify for exemption under section 54f. for example, there is Rs. 15 lakhs received as consideration for sale of shares (long term capital gain). Assume capital gains is also Rs. 15 lakhs. The assessee buys a new property for Rs. 20 lakhs, taking Rs. 16 lakhs as loan and paying 20% from his pocket, will the exemption be available under section 54F.

By: ASHOK L. GOSAR

ASHOK L. GOSAR — Sun, 13 Dec 2009 05:55:41 +0000

Dear Rajesh and Suchi,

you have provided very good information.

Thanks,
Ashok Gosar