Capital Gains reinvested on name of Husband & Wife separately

Dear Sir,
We sold a joint property for Rs.1.20 chores and the purchaser paid both my wife and me self Rs.60.00 lakhs each.
My wife purchased a Flat for Rs. 50.00 lakhs and my self purchased another Flat for RS.70.00 lakhs. My wife financed Rs.10.lakhs for purchase of my Flat.
The question is: will capital gains tax have to be paid my wife for Ten lakhs?
Since one common property was sold and we purchased Two Flats (one for living &
Another for Monthly Income- Being retired people) for a total cost of 1.20 crores,
are we not exempted in paying CGT.
Kindly advise.
Jayaraman
[email protected]

 

If you have sold a residential house - then you only have to reinvest the Capital Gains and not the whole amount of sale proceeds.

 

Mr.Manoj Mehra,
Thanks for your kind response. But I am not clear. My Auditor informs me
That me wife has to pay CGT on the difference between sale proceeds of 60.00lakhs and purchase of New Flat at the cost of Rs.50.00lakhs.
My contention is since we have reinvested the entire sale proceeds of
Rs.1.20 crores in two Flats (although in my wife's name and my name),
there is no need to pay CGT.
Can you clarify on this issue with relevant IT rulings.
Thanks.
DS.Jayaraman

 

The asset sold by you - Is it a Residential House or a Residential Plot or Commercial Property?

The tax treatment will depend on the type of property sold.

 

Dear Mr.Manoj,
This is a residential Flat purchased by us from Tamilnadu Housing Board
Chennai in 1970. The property was registered jointly in my and my wife's
Name. We sold the property in Jan 2014 and purchased two flats as stated earlier.
Hope this info will suffice.
With regards.
DS.Jayaraman

 

As the property sold is a Residential Flat, then Section 54 would be applicable for claiming capital gains exemption.

Under Section 54, you only have to reinvest the Capital Gains and not the total sale amount. As you have already invested more than the Capital Gains - therefore there would not be any tax liability.

Check with your accountant about the section which he is checking and tell him to re-check the guidelines for claiming exemption under Section 54.

It seems that maybe he is reading the guidelines under Section 54F

 

Dear Mr. Manoj
Thanks for your clarification
DS.Jayaraman