Comments
I am planning to sell a plot in the name of three brothers and use it in the construction of a residential house. The house plot is in the name of two brothers. How to avail tax benefits by utilising the sale proceeds in construction of residential house? Is there any way to get tax break for the third brother if his share also invested in the house property?
Chavali Sarveswarasarma
Section 54F of the Act provides for deduction while computing taxable capital gains arising from sale of long-term capital assets other than residential house property. Certain conditions are attached for claiming this deduction. Some of them are:
a. The residential house should be constructed in India either one year before the date of transfer of plot or within three years after the said date.
b. Net sale consideration from sale of long-term capital assets (Plot) is invested in purchase/ construction of a residential house.
c. The new residential house should not be transferred within a period of 3 years from the date of its acquisition / construction.
d. The individual claiming the deduction should not own more than one residential property apart from the new property at the time of selling the plot.
Deduction is not available if the individual purchases a third property within a period of two years after the date of transfer of plot (or) constructed within a period of three years after the date of transfer of plot other that this new property. If the conditions are not fulfilled then, capital gains deduction referred above is taxable in the year in which the conditions are breached.
An individual may not be able to get a tax benefit on sale of plot unless the investment in new asset is also done in his name. In this case, since the 3rd brother does not own the plot on which house is going to be constructed, he’ll not be able to get section 54F deduction. However, he can still explore deduction under section 54EC wherein he can invest up to ₹50 lakh on prescribed bonds within six months from the date of sale.
The writer is Partner, Deloitte India
Send your queries to taxtalk@thehindu.co.in
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.