Query on recent amendment on tax rules
Bhaskar
(Querist) 28 October 2014
This query is : Resolved
Dear Sir,
I heard there is recent amendment of income tax related to long term capital gains. Can someone help in below case
1) I already have flat and staying in it (E.g. Flat A)
2) I sold plot (E.g. Plot B) and having long term capital gain out of sale proceed
3) I invest sale proceed of plot B in buying new flat (E.g. Flat C)
Can I claim Sec 54F benefit (relief from the tax on long term capital gains earned from property) for Flat C after recent amendment ?
Thanks,
Bhaskar
Anirudh
(Expert) 28 October 2014
Dear Mr. Bhaskar,
According to the recent amendment it has been specified that Sec.54F benefit would be available only if 'a residential house' is purchased, using the capital gain.
Earlier, people used to purchase two adjacent flats and then claim it to be one residential house. Some of the courts also interpreted the provisions to the advantage of the tax payer.
Now, to plug such misuse of the provision of Sec. 54F, the section has been amended to clarify that 54F the benefit will be available only in respect of purchase of 'a residential house'.
Since you propose to buy only one Flat C, the amendment will not affect you. You can go ahead and buy and save capital gains tax arising from sale of the land.
Having given my views, I must also add that from this LCI Forum, you will get prompt advice to GET IN TOUCH WITH A TAX CONSULTANT/TAX EXPERT. (Please do so, and do not believe my views, even if it is technically and legally correct.)
T. Kalaiselvan, Advocate
(Expert) 28 October 2014
Agreed with the views of expert Mr.Anirudh. The provision of the act further states that:
– “Net consideration”, in relation to the transfer of a capital asset, means the full value of the consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer, i.e. where the assessee owns on the date of the transfer of the original asset, or purchases, within the period of one year after such date, or constructs, within the period of three years after such date, any residential house, the income from which is chargeable under the head “Income from house property”, other than the new asset.
For further benefits, you may read the provisions of subsection 4 of section 54F of the act.
