My wife bought a residential plot in 2010 for ₹10.50 lakh. In 2020, she entered into an agreement with a builder to construct an apartment having 16 flats. Out of the 16 flats, eight flats were allotted to her as land owner's share. The total sale value of these 8 flats is approximately ₹4 crore. Can she buy residential land and construct a house to offset the long-term capital gains tax? If the answer to the above query is 'yes' then my next query is - can she list this 'to be constructed residential property' on,, etc. and give it out on rent? Note : Apart from the 'residential land' converted into an apartment, she has two other residential properties (flats) registered in her name.

Kaushal Kumar

In case of a joint development, capital gains will arise only in the year of completion of construction of house property. Your wife can claim exemption under Section 54 by purchase or construction of a residential house property, within the specified timelines. Investment in bonds under Section 54EC is another option for claim of exemption of capital gains.

Any rental income earned from the house property would be taxed in the hands of the owner i.e. your wife, as Income from House Property. Property tax and other local tax payments made during the relevant financial year can be claimed as a deduction from the rental income apart from 30 per cent for repairs and maintenance.

The writer is a practising chartered accountant

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