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  1. Srini Krishnan

    Srini Krishnan New Member

    Dear Forum Members

    I had sold a property in June 2013 and out of the Capital Gains arising out of the sale of the property, I have invested in land and building. As per the Income Tax Act I had to invest Rs 46 Lakhs either towards an apartment by June 2015 or buy a land and construct a house by June 2016 to avoid paying Capital Gains Tax

    I bought a vacant land in September 2015 for Rs 90 Lakhs (much more than the Capital Gains that I needed to invest as this is the only land I could afford in the fringes of the city) and commenced construction in November 2015. On completing the foundation and plinth I ran out of funds and I could not complete the construction. As per the Income Tax act I need to have completed the house construction by June 2016. But there is no way I can complete the construction by June 2016 as I do not have the necessary funds to complete the construction. At best I can put a roof cover using asbestos or roof sheets and make it a partial dwelling unit

    I have an Electricity Connection and a certificate from the contractor for completing the foundation and plinth. Is this good enough for Income Tax or would I have to pay Capital Gains tax as I have not completed a house or a dwelling unit

    Suggestions from experts will be appreciated


    Srinivasan Krishnan

  2. V K Khanna

    V K Khanna Active Member

    The following case Laws would go in your favour to claim tax exemption on LTCG.

    1. Seems Singh Beniwal vs DCIT (ITAT Jaipur) ITA 135 of 2012 Date of Judgement: 9.10.2015

    There is no restriction that what % of the size of the flat should be used for residential purposes under the
    IT Act. ........ The residential house should be habitable for human being either servant or master or any

    2.Karnataka High Court judgement dated 13.7.2015: ITA 165 of 2014 CIT &ITO vs Smt B S Shanthakumari

    The judgement says that a bare perusal of the said provision (54F) doesn't even remotely suggest that it intends to convey that such construction should be completed in all aspects in three years and make it habitable. The essence of provision of 54F is to ensure that the assessee who has recd capital gains, would invest the same by constructing a residential house and once it is established that consideration so received on transfer of his long term capital asset, has invested in constructing a residential house, it would satisfy the ingredients of Sec 54F[/URL].
    Srini Krishnan likes this.
  3. V K Khanna

    V K Khanna Active Member

  4. Srini Krishnan

    Srini Krishnan New Member

    Dear Mr Khanna

    Thank you very much for your response, this is very much appreciated



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