• Relief under section 54

1) In FY2017-18, I sold a residential house property (sale deed for purchase was registered in FY2009-10 and possession obtained in FY2010-11). Gain on sale (post indexation) of about INR 30 lacs and net sale consideration of INR 2.14 crores
2) In May 2011, I had purchased another under-construction residential house property. 60% (INR 1.8 Crores) of the property value (INR 3.0 Crores) has already been paid (last instalment was paid in March 2013). There is an allotment letter but no registered sale deed. The work was stalled for past 5 years but is now expected to launch again in next few weeks along with completion of registration formalities
3) Once started, the under-construction property should get completed (possession) within 3 years

1) For computing capital gains, should I consider Cost Inflation Index of FY2009-10 (date of sale deed) or FY2010-11 (date of possesion)

2) Can I claim relief under section 54 while filing ROI for AY2018-19 for the under construction property on the basis of sum invested already (INR 1.8 crores) is greater than INR 30 lacs capital gain. Please note I still do not have a registered sale deed for the underconstruction property but is expected to happen in few weeks / months.

3) if (2) is Yes, then what if the under construction property is not completed within 3 years 

4) If (2) is No, then can i purchase another under construction residential house property (say for total value of INR 2 crores) before March 31, 2018 under 5:95 scheme (I pay only 5% and bank loan for balance 95%). Amount paid before March 31 2018 is INR 10 lacs (i.e. 5% of INR 2 crores) which would be less than the capital gain of INR 30 lacs.
Asked 4 years ago in Taxation

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5 Answers

the income Tax Tribunal has recently ruled that holding period should be computed from the date of issue of allotment letter by the developer. If the investor sells the property 24 months after receiving the allotment letter, it will be considered as a long term capital asset. The seller would then need to pay LTCG tax on it, which would reduce his tax outgo.

2) in your case you should consider Cost inflation index of date of sale deed and not date of possession

3)an assessee is entitled to the benefits of section 54 of the Act, if he has purchased the new property within a period of one year before the date of transfer of the old property or within two years from the date on which the transfer of old property took-place.since complete amount of consideration was paid to the builder there is no requirement to produce an agreement when the letter of allotment alongwith proof of payment clearly established that assessee had invested towards acquisition of a new residential house.

4)The Hon'ble Delhi High Court further referred to the decision of Hon'ble Madhya Pradesh High Court in the case of Smt. Shashi Varma vs. CIT, 224 ITR 106(M.P) and that of the Hon'ble Calcutta High Court in the case of CIT vs. Smt. Bharati C. Kothari (Cal) 244 ITR 352 and opined that when substantial investment was made in the new property, it should be deemed that sufficient steps had been taken and it would satisfy the requirements of section 54 of the Act. As per the Hon'ble High Court, the basic purpose behind section 54 of the Act is to ensure that the assessee is not taxed on the capital gain, if he replaces his house and spend money earned on the capital gain within the stipulated period.

5) even if sale deed is not executed you can claim relief under section 54 of income tax act as allotment letter has been issued to you and you have made substantial payment

6) even if construction is not completed within 3 years you would not be denied benefit

Ajay Sethi
Advocate, Mumbai
87895 Answers
6207 Consultations

5.0 on 5.0

1. cost inflation index will be calculated from the date of sale deed.

2. If the money has been invested within one year (from the date f transfer of old property) then the benefit of sec 54 can be taken, it does not matter that you have a registered sale deed or not.

3. If the money has been invested then in light of the judgment of various courts, it can be safely interpreted that proper investment has been done and the payer shall not be further liable.


Anilesh Tewari
Advocate, New Delhi
17940 Answers
377 Consultations

5.0 on 5.0


The calculation of index is available from the year of registration of the property and to the year of sale and the amount should be utilized for purchase with inone year prior or two years after to get the benefit of section 54B.

So the capital gain so realised should be used to purchase of any property to maximum of two years form the year of sale.

Please be informed that the year starts with the 1st April of the AY

Vimlesh Prasad Mishra
Advocate, Lucknow
6848 Answers
23 Consultations

4.9 on 5.0

Raju Rudra Rao vs. ACIT (35 taxmann.com 90) (Hyderabad-Tribunal) The co-ordinate Bench has decided as follows:•

Provision contained under section 54F being a beneficial provision has to be construed liberally. In various judicial precedents it has been held that the condition precedent for claiming benefit under section 54F is only that the capital gain realized from the sale of capital asset should be parted by the assessee and invested either in purchasing a residential house or in constructing a residential house. If the assessee has invested the money in construction of residential house, merely because the construction was not complete in all respects and it was not in a fit condition to be occupied within the period stipulated, that would not disentitle the assessee from claiming the benefit under section 54F.

Ajay Sethi
Advocate, Mumbai
87895 Answers
6207 Consultations

5.0 on 5.0

1. Date of registration of property in your name shall be date of computation.

2. Section 54 gives relief from such a

hardship. Section 54 gives relief to a taxpayer who sells his residential house and from

the sale proceeds he acquires another residential house.

Within a period of one year before or two years after the date of transfer of old

house, the taxpayer should acquire another residential house or should construct a

residential house within a period of three years from the date of transfer of the old

house. In case of compulsory acquisition the period of acquisition or construction

will be determined from the date of receipt of compensation (whether original or


3. see the above reply.

4. You can claim the benefit of section 54 by purchasing/constructing a residential house within the time-limit as provided under section 54.

To claim exemption under section 54, the taxpayer should purchase another house within

a period of one year before or two years after the date of transfer of old house or should

construct another house within a period of three years from the date of transfer. If till the

date of filing the return of income, the capital gain arising on transfer of the house is not

utilised (in whole or in part) to purchase or construct another house, then the benefit of

exemption can be availed by depositing the unutilised amount in Capital Gains Deposit

Account Scheme in any branch of public sector bank, in accordance with Capital Gains

Deposit Accounts Scheme, 1988.

The new house can be purchased or constructed by withdrawing the amount from the said account within the specified time-limit of 2 years or 3 years, as the case may be.

T Kalaiselvan
Advocate, Vellore
78050 Answers
1543 Consultations

5.0 on 5.0

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