Dear Sir,I have sold a plot in July 2012 for a sum of Rs. 89 Lac, which was purchased in July 2003 for a sum of Rs 966875/-(Rs.855000/-cost of plot and 111875/- as registry fee)and registered in my name as first owner and my wife as co owner, the whole amount was arranged by me (from Bank loan of Rs. 725000/- and rest amount from my savings) to purchase this plot, my wife paid nothing in this deal . Now after depositing a sum of Rs. 609668/- to clear my bank loan a/c and Rs.144000/- for non construction fee to HUDA from my long term capital gain, if i purchase a properties from the balance capital gain, and instead of my wife make my brothers as co owner in these properties. what will be the tax liability for me and my brothers. can i purchase two properties from my long term capital gain. please advise.
1 Answers
As a plot is being sold, section 54F can be used to avail tax benefits on purchase of new residential house property. New property should be a constructed house/flat/apartment or you can construct your own house on a plot.
In order to save income tax fully, your share in new property cost should be more than your share in sale consideration of plot. In case old plot was jointly owned by you and your wife in equal ratio, each one would have equal share in sale consideration.
New residential house property may be single or jointly owned with anyone, but to avoid full income tax, cost of your share should be more than sale consideration share.
Two properties cannot be purchased from long term gains for tax benefits. You and your wife may buy different properties to save tax on individual long term gains.
Also, please make sure that following conditions are met for section 54F to be applicable:
- You should not be owning more than one residential house property at the time of sale of plot
- New property should not be sold in next three years of possession.
- Possession of new property should be taken within two years of sale of plot. Or If construction is done yourself, it should be completed within three years.
- In next three years, total residential house properties owned by you cannot be more than two.
Dear Pankaj Ji
Thanks for your reply. Kindly clarify following more points :
The LTCG from selling my plot is approx.. 72 L. Since it is a residential plot so can I purchase a residential plot which would be cost to me 56 L (total cost). Rest amount of Rs. 18L will be used in construction in near future. Is it ok to save LTCG tax.
Since all the payment was arranged by me only to purchase the plot, nothing was mentioned in the registry about the ratio of sharing.
I read an article of a Charted Accountant that LTCG shall be available to person who paid for buying the property. Am I entitled for the same?
I want to make my two brothers as co- owner in new property, which would cost Rs. 56L. My brothers shall not pay any amount to buy the plot since I will bear the total cost of plot of Rs. 56 L by using my LTCG.
What is the difference between u/s 54 & u/s 54 F. which one will be applicable in my case.
I read on of your answer on dated 3rd January 2012 at 10.26 a.m. where you have mentioned that If the capital gains are earned from selling a residential house property, then there is no limit on how many properties a person may own u/s 54. But if asset being sold is not residential one, total house properties in the name of person (solely/jointly owned) should not exceed more than two (including new purchase). – Since my plot was a residential property, is it applicable on me also ?
To save tax fully, amount more than sale consideration would need to be spent on new residential property. If spent is less, income tax would be payable on unused sale consideration proportionally.
You can buy plot and construct house on it to save tax but construction must complete before end of three years from sale.
In case whole amount was paid by you and no ratio is specified in registry, you may consider whole gain yours only.
Your whole payments in new property would be considered for long term gains even if its jointly owned with anyone.
Plot is not a residential house property since its not constructed. Its a normal capital asset and section 54F would only apply.
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