Yes she can invest the amount of plot B to complete the construction. She can claim Capital gain benefit on sale of plot B.
Sale of Residential plot
My mother is having 1 house in her name.She sold a Residential plot 'A' in January 2017 for 85 lakhs. After selling the plot she invested the whole amount(85 lakhs) of plot 'A' in constructing another house under section 54.Now the construction is halfway and she needs more amount for further constructions.She is planning to sell another Residential plot 'B' which is on her name for completing the remaining construction.What will be the scenerio of Capital gain if she sells the plot B on August 2020.Can she invest the amount of Plot B to complete the construction.
Asked 4 years ago in Capital Gains Tax
Dear Sir,
Hope you are doing well !!
Yes, she will get the benefit of capital gain exemption u/s 54F.
However, the construction must be completed within 3 years.
It is advisable to take a phone consultation for detailed discussion.
Hello,
Capital Gain Exemption on sale of Residential plot 'B' would be available for investment in the construction of the house property. The exemption would be available u/s. 54F since the sold property is a plot.
I hope this answer satisfies your requirements.
Regards,
CA Hunny Badlani
First of all if she has sold plot how is she eligible for section 54 and how did she claim exemption under 54 when she sold first plot A. She must be claiming exemption under 54F.
Further now its August 2020 and if she has still not completed construction of house and its been more than 3 years she should first pay the earlier capital gain and then think of setting of capital gain of this new plot.
Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.
Thank you.
In the above question Plot A (residential) was sold on January 2018.And the whole amount was used on construction of House.Now in August 2020 we want to sell Plot B (residential ).The 3 year period will be over on January 2021.Can we use the amount of Plot B to complete the construction of house.Will there be any tax liability on the amount of Plot B.
Asked 4 years ago
Hi
She can claim exemptions under section 54F
Provisions of section 54F of the Income Tax Act provides exemption towards long term capital gain (other than a residential house) when the amount is invested in purchasing or constructing a new residential house property.
Dear Sir,
The basic condition for claiming deduction u/s 54 is that you should not hold any other Residential property other than the property for which the loan is taken. Since, you already have additional Residential Property, you cannot claim deduction u/s 54.
Thanks and Regards
Shiv Kumar Agarwal
You could save tax but it will be a bit controversial to claim single house as exemption against two sale.
No, there will be no tax liability on the amount of plot B.
It is advisable to take a phone consultation for detailed discussion.
Hi
Firstly, exemption shall be available under section 54 F on sale of plot A and plot B and not under section 54.
Although claiming exemption on sale of plot B is a litigative issue, but there are judicial pronouncements in favor of the assessee.
Ensure that the construction is completed before Jan 21.
Hello Sir
Yes ur mother can claim exemption of amt recd from sale plot B but make sure u took exemption under correct section that is sec 54F
You would be able to claim exemption u/s. 54F for capital gain on Plot B.
Hi
Yes you use amount of plot B to complete the construction of house.No there will not be any tax liability on the amount of Plot B.
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