Regarding section 54 of Income tax

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  1. saikatchanda

    saikatchanda New Member

    Hello SMEs,

    I am have just sold a property on 11 th July 2016.
    I bought an under construction property on 5th May 2015.

    My queries are as follows.
    Should I claim exemption under section 54?
    As its previous financial year.

    ALso please note i bought an under construction property,
    I hope it will not be an issue to claim the rebate.

    Thanks for your valuable suggestion

    Regards
     
  2. ZED

    ZED Well-Known Member

    I would advice not to claim exemption because it was acquired in the previous financial year.
    There are several contradicting judgements but its better to be safe than sorry.
     
  3. saikatchanda

    saikatchanda New Member

    Thanks ZED

    But I heard that exemption is allowed for a purchase before one year of sell.
    My question is as my purchase is more than year but still falls on previous financial year, can I avail this?
     
    ZED likes this.
  4. ZED

    ZED Well-Known Member

    Please go through the following extracts with special emphasis on coloured text and let me have your understanding. Different colour have been used to emphasise different aspects , and also consider the grammer.

    54. (1) Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (hereafter in this section referred to as the original asset), and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India, then, instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,—
     
  5. saikatchanda

    saikatchanda New Member


    My understanding is that we can't claim exemption if the purchase is one year before. But I heard the rule is previous financial year and hence this doubt :(
     
  6. ZED

    ZED Well-Known Member

    Sir, please read again
    S. 54 is providing exemption in 2 cases

    1. Purchase
    2. Construction

    Now observe again.
    For purchase its written

    ...the assessee has within a period of one year before or two years after the date on which the transfer took place purchased..."
    Therefore in case of purchase it is one year before or 2 year after condition


    In case of construction its written
    or has within a period of three years after that date constructed,
    Here the words "one year before" has not been written.


    Hence if its a case of purchase then 1 year before condition will allow you the exemption. But if its a case of construction then the condition is that assessee has constructed with a period of 3 years...




    Please read the previous post again and kindly let me know if you we have consensus.

    Yours is in different Financial Years.Under Construction house purchased in May 15.

    I am have just sold a property on 11 th July 2016.
    I bought an under construction property on 5th May 2015.
     
    saikatchanda likes this.
  7. saikatchanda

    saikatchanda New Member

    Yes Sir. I agree with you. I have the same view. In a but shell I should not claim the exemption under this section as my purchase is more than a year. Do you agree?
     
  8. ZED

    ZED Well-Known Member

    To be honest I am not even calculating the period mentioned by you, I am hitting the principle here. If its a case of purchase of residential house then only period of 1 year before shall apply, if its a case of construction then 1 year before condition has not been expressly mentioned.

    On precautionary basis I am telling to not to claim exemption.

    I did not hit that you invested more than an year ago, because that too can be countered.
    The words written are has constructed.
    This means that construction should have completed. Now in 2015, construction did not completed, it began in 2015 , though it might be completed within 3 years from date of transfer. So if I see "within a period of 3 years after the date of transfer" then exemption might be available.


    Now, my 2 explanations might be sounding contradicting and both might be appearing logical. This is the issue, we have contra judgement, some judgement allow the benefit while other don't. That's why asking not to claim exemption.
     
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