Capital gains tax
Bhaskar Dey
(Querist) 10 May 2013
This query is : Resolved
I have a residential house the construction of which was completed in 1991. I also purchased a residential flat in 2007. We don’t have son. Our daughters are already married and staying in their own houses quite far from this place. It will not be possible for them to come and stay in these properties. Nor it will be possible for them to maintain each property from such a distance. So we have decided to sale both the properties and buy a three roomed flat which will be quite sufficient for us (Husband and Wife) for the rest of our lives. I have calculated that the sale proceeds of each property individually will be less than the cost of the new flat. But the sale proceeds for the two properties combined will be little more than the cost of the new property.
My question is that, to get benefit of Section 54/54F of LTCG, can I club the sale proceeds of two old properties and invest in a single new property within the time frame? Is it allowable under this section? Or I have to purchase one new property each from sale proceeds of each property to get the benefit. I do not want to do that. I want to purchase only one property. I’ll request honourable experts to kindly answer my queries. Many Thanks in advance.
Vineet
(Expert) 11 May 2013
Since you are selling residential houses, you will be eligible for exemption u/s 54 for purchasing new house (residential flat). You will have to only invest the long term capital gains amount and not the entire consideration to claim this exemption.
Coming to core issue, there has been debate whether exemption u/s 54 can be claimed in respect of two properties whose sale proceeds have been invested in one residential property. Courts have taken a liberal view in the matter and allowed assessee's claim. Therefore relying upon court verdicts, you can go ahead with your plans but you may have to undergo litigation as there is still a chance that tax authorities may dispute your claim.
A safer option is that you buy two adjacent flats and merge them. You can claim exemption u/s 54 in respect of each flat against different properties sold.
Bhaskar Dey
(Querist) 12 May 2013
Many many thanks Mr.Vineet. I fully understand your point. Unfortunately, that will not be possible now, because I already have paid some advance money, and it appears that no adjacent flats are available now in that building. I am getting one 2BK flat three floors up. Others are all booked.
Please correct me if I am wrong, my other alternative is to keep the extra amount in NABARD or similar deposits. Or is there any other way. awaiting for your advice.
Thanks again
Bhaskar
