According to Section 54 – any Long Term Capital Gain, arising to an Individual or HUF from the sale of a Residential Property (Whether Self-Occupied or on Rent) and

Under Section 54F – Gains from any Long Term Asset (other than a residential house property) provided on the date of transfer the taxpayer does not own more than one residential house property;

The long term Capital Gains arising from above shall be exempted from tax to the extent of such capital gains is invested in;

  1. Purchase of another residential property within 1 year before or 2 years after the due date of transfer of the property sold or
  2. Construction of Residential house property within a period of 3 years from the date of acquisition provided that the new residential house property purchased constructed is not transferred within a period of 3 years from the date of acquisition.

Here the issue is, if the new house is bought in the name of the spouse, can the capital gainer still claim deduction u/s54 and u/s 54F? That means, if the new asset is bought jointly with spouse or in the case the new asset purchased in the name of spouse without even including the assessee’s (capital gainer) name in the title deed.

The answer is “Very Much YES”. Here the assessee can very well claim the tax exemption, subject to the following conditions have been satisfied;

  1. No expenses should be done by wife (if the capital gainer is husband) or husband (if the capital gainer is wife) in whose name the property is being registered.
  2. There must be reference in the conveyance deed about husband (if the capital gainer is husband) or wife (if the capital gainer is wife) that he/she paid the money for the property.
  3. An affidavit should be kept to show the wife (if the capital gainer is husband) or husband (if the capital gainer is wife) name is just for the sake of holding the property.

Thus the assessee (capital gainer) is eligible for availing deduction even if the title deed contains the name of his/her spouse.

Claim Deduction u/s 54 and 54F even if the New Property is Bought in Spouse Name

2 thoughts on “Claim Deduction u/s 54 and 54F even if the New Property is Bought in Spouse Name

  • October 16, 2013 at 3:18 PM
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    One of my client Sold his House Property Long Term Capital Gain is Rs.961427 she purchased
    new House in which she invested Rs.1841000 ( Incuding Bank loan Amt. Rs.1472500) . What will be deduction u/s.54 ? Some of my C.A. advised that you can clain Rs.1841000 and some has advised about deductin that Total Investment done in new Resi. proprty – Less Bank Loani.e. 1841000-1472500 = Rs.368500 deduction u/s. 54 can be done…What will be Deduction ? Please give me any judgement of Supreme court or High Court

    Reply
    • October 30, 2013 at 10:19 PM
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      Hi Karshanbhai,

      I don’t think it’s a complex case that needs to be referred by any court judgement. Since your client has been funded Rs. 14,72,500 by bank loan and he only utilised Rs. 3,68,500 out of total LTCG then he has to pay tax on Rs. 5,92,927 i.e. [Rs. 9,61,427 – Rs. 3,68,500]

      Reply

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