Will a tax payer contribute the drawn out capital gains from the offer of two distinct resources into a solitary property and claim exemptions under both, sections 54 and 54F? We take a gander at a judgment of the annual tax court, to respond to this inquiry.
The Income Tax Act accommodates exemption from tax on long haul capital gains under two separate sections, Section 54 and Section 54F, if the investment of the gains is made for buy or development of a private house. Regardless of whether a tax payer can claim exemptions under both the sections, if the investment is made in a similar private house, had been a topic of suit commonly.
Incase if you are planning to invest in property in India, you can browse www.houseey.com for properties in different cities which has offers and discount available.
Exemption from LTCG tax, under Section 54 and Section 54F
Sections 54 and 54F of the Income Tax Act, permit one to claim exemption from tax on long haul capital gains, if the equivalent is utilized for the buy or development of a house inside determined time limits. Albeit both the sections permit exemption for long haul capital gains tax, the conditions to claim the exemption under the individual sections are unique.
The principal distinction between these provisions, relates to the kind of resource discounted, for which you can claim the exemptions. The Section 54 is accessible for long haul capital gains discounted of a private house, though Section 54F is accessible for long haul capital gains at a bargain of any resource other than a private house. Essentially, there is a distinction as for the sum to be contributed, for claiming exemption in both these provisions. Area 54 expects you to contribute just the recorded long haul capital gains, though Section 54F is accessible if the net thought of such resources is contributed. Additionally, to claim the exemption under Section 54F, try not to possess more than one house, as on the date of offer of such resource, notwithstanding the one which is bought or built. No such prerequisite is there under Section 54.
There are likewise likenesses between the sections. Both these sections are accessible, if the investment is made for the buy or development of a private house in India. In like manner, for the acquisition of a house, the period indicated is one year prior or two years after the offer of the resource/s. For the development of a house, both the sections require consummation of development inside a long time from the date of the offer of the resource, independent of when the development is started.
As these are two unique sections, the tax officials have been taking a view that to claim concurrent investments, you need to put resources into two distinct houses and can’t claim the exemption by putting resources into one house. This was settled by the Hyderabad Tax Tribunal.
Measure of exemption accessible under Section 54
Under Section 54, the exemption sum on the drawn out capital gains will be the lower of: the gains emerging from the exchange of the house property or the investment made in buy or development of another house property.
The assessee additionally presented that the Act doesn’t need that for claiming exemption under sections 54 and 54F of the Act, the assessee needs to put resources into two separate houses. Sections 54 and 54F arrangement with the offer of various resources and call for investment in house property.
It was submitted before the Tribunal that both these sections are autonomous and work in seclusion. The assessee further presented that the understanding of the lower specialists that as these two sections are isolated and call for investment in one private house and in this manner, the assessee ought to have put resources into two unique houses, is certainly not a right translation.
It was called attention to that no double allowance was claimed, as the whole capital gain of the private house was put resources into the piece of the new private house and the deal thought of the plot of land was put resources into another piece of the new house.
Area 54 and 54F of the Income Tax Act are autonomous of one another
While conveying the choice, the Tribunal saw that a perusing of sections 54 and 54F clarify that they are autonomous of one another and work regarding long haul capital gain emerging out of the exchange of particular and separate long haul capital resources. The Tribunal further saw that both the sections permit exemption, just on buy or development of another private house. The Tribunal likewise saw that as per the lower specialists, for claiming exemption under both, sections 54 and 54F, the assessee needed to put resources into two houses. The court concluded that in their view, such a translation of the provisions was completely misconstrued and lost.
The Income Tax Tribunal further saw that the condition for profiting exemption under both the sections, is buy or development of another private house inside the specified period. There is additionally no particular bar, either under sections 54 and 54F, or some other provision of the Act, precluding remittance of exemption under both the sections, in the event that the states of the provisions are satisfied.