• Long Term Capital Gain tax Exemption in case of reinvestment in a property co-owned with son

My father is selling a property which he owns for more than 3 years for 80L, and we are planning to buy a flat worth 1.1 crore, My father would invest the entire proceeds in the new apartment and I am planning to take a loan for the remaining 30L. My Question is:
1. Would he be able to claim LTCG exemption under Section 54 of IT act.
2. The apartment which we are planning to buy is under construction, would the LTCG exemption be applicable for 2 years or 3 years in this case.
Asked 4 years ago in Property Law
Religion: Hindu

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7 Answers

Firslty, yes sir you would be able to avoid the LTCG tax.

Secondly, if you are selling any property and investing the whole amount of it in another property within the period of one year then you would not be paying any tax for LTCG.

Thirdly, yes it is applicable as you are investing the money today irrespective of the fact that the same flat you will be getting after 2 or 3 years as the owner of the same.

Sanjay Baniwal
Advocate, South Delhi
5464 Answers
13 Consultations

5.0 on 5.0

Your father would be entitled to claim exemption for long term capital gains as he is investing entire sale proceeds in purchase of under construction property which should be completed within period of 3years from date of sale

Ajay Sethi
Advocate, Mumbai
87976 Answers
6207 Consultations

5.0 on 5.0

1. Yes he will get exemption under 54F of IT fact following all the terms of the section.

Exemption of Capital Gain on Transfer Of Long-Term Capital Assets in case of Investment In Residential House

In case an individual and HUF transfer any long-term capital asset (other than the residential house the income of which is taxable under the head ‘Income from house property’) and constructs a residential house within 3 years after the sale or purchases another residential house within one year before or two years after the sale, so much of capital gain shall be exempted as is in proportion of amount invested to net consideration.

Exemption u/s 54-F shall be allowed if following conditions are fulfilled.

(i) The assessee is only an individual or a H.U.F.

(ii) The assessee does not own more than one residential house on the date of transfer of the above mentioned assets.

(iii) The assessee transfers above mentioned asset or assets (other than a residential building) and there is a long term capital gain.

(iv) The assessee invests the net sale consideration of above mentioned assets to construct a residential house within 3 year of the sale of the asset or purchases an already built house within one year before or two years after the sale of the above mentioned asset.

(v) The assessee is required not to purchase another residential house with in a period of one year after or constructs within a period of 3 year after the date of transfer of the above mentioned asset/assets.

2. Three years.

ACIT Vs. Sh. Vineet Kumar Kapila (ITAT Delhi)

ITAT held that booking of flat with the builder has to be treated as construction of flat by the assessee and hence period of three years would apply for construction of new house from the date of transfer of long term capital asset

Shubham Jhajharia
Advocate, Ahmedabad
25516 Answers
179 Consultations

5.0 on 5.0

1.Your father can claim exemption under S 54 of IT Act for long term capital gains if he invests the entie sale consideration.

2. Exemption under S 54 of IT Act would be for 3 years.

Siddharth Jain
Advocate, New Delhi
5933 Answers
101 Consultations

5.0 on 5.0

1. Yes your dad will be eligible for tax exemption despite the purchase being made jointly. Important is investment of sale proceeds of old property in new property

2. If new property is under construction then investment can be made within 3 years from date of sale of old property

Yusuf Rampurawala
Advocate, Mumbai
6882 Answers
79 Consultations

5.0 on 5.0

Dear Client,

Even buying property in the name of relatives provides exception u/s 54 of the Act, so in joint ownership.

Construction must complete within 3 years of sale and exemption can be taken back if this new property is sold within 3 years of its purchase/completion of construction.

Yogendra Singh Rajawat
Advocate, Jaipur
21481 Answers
31 Consultations

4.4 on 5.0

1. Yes he can very well invest the entire capital gains in the new house to be purchased either in his name or in the joint names and can claim exemption under section 54 of IT act.

2.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


T Kalaiselvan
Advocate, Vellore
78133 Answers
1543 Consultations

5.0 on 5.0

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