Exemption from capital gain

I have sold my apartment in January 2011 and since deposited the capital gain in the bank as per Capital Gain Scheme. My wife has an apartment and intends to sell it. If both of us jointly purchase a single apartment (without any demarcation) from the proceeds of capital gain deposit and sale proceeds of her apartment, within the prescribed period, will both of us get exemption from capital gain under Income-Tax? Secondly, if capital gain amount arising on sale of the apartment is utilized for purchasing an apartment, within 2 years, will the condition for exemption be satisfied even if possession of the apartment is delayed beyond 2 years, due to no fault of the buyer?

V. Narayanan, e-mail

Section 54 does not require that the house purchased or constructed should be owned singly by the seller who claimed exemption thereunder. All that it requires is that the requisite amount must be invested in a house by way of purchase or construction within the specified period. In the event, there is no bar on joint purchase for making the grade for exemption. As to your second query, what is required is completion of construction within three years of transfer. In your case it appears that you are not buying a readymade house. Rather, the house is being constructed with the progress payments made by you. This brings your new house under the definition and norms applicable to construction rather than to purchase. So you must make sure that the house is fit for occupation within three years from the date of transfer. You may have to put appropriate pressure on the builder.

Tax liability on FD

My wife is a housewife and she earns approximately Rs 10,000 per month by tuition at home. She gives me the amount (Rs 10,000 per month in cash) and I deposit it in my account. I have made 50,000 + 50,000 (Rs 1, 00,000) Fixed Deposit (FD) every year for 3-year / 5-year tenures. All FDs are made in my wife's account, which is a joint account with me, and my wife is the first holder of the account. My wife has a PAN card and I want to give form 15G to the bank for not deducting TDS. Please tell me if any tax liability exists.

Neeraj Dwivedi, e-mail

There is no tax liability because her annual income is only Rs 1,20,000, whereas she is entitled to enjoy a tax-free income of Rs 1,90,000. Lest you are harassed, I suggest you open a savings account in her name and deposit her income directly into her account.

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