Parthasarathy had sold some shares from his HUF account in April 2020 when the market was down, fearing that it might get worse. This resulted in huge long term capital gains. Considering the current trend and risk atmosphere, Partha wants to know what would be the best option for him.
Long term capital gains accrued from sale of equity shares are exempt up to Rs. 1 lac in a financial year. Beyond 1 lac, the long term capital gains are taxed at flat 10% (subject to grandfathering conditions). Sec 54F provides for exemption from Long term capital gains if investment is made in a house property.
“Don’t wait to buy real estate, buy real estate and wait.”
T. Harv Eker
As far as investments are concerned, Land and building are considered as safe haven. COVID19 affected a lot of sectors including the real estate sector. To boost the demand in real estate sector, RBI has taken several bold initiatives which resulted in bringing down the the housing loan interest rates which is at a decade low now. Partha can take advantage of this and invest in a new house property with the amount received as sale consideration from sale of shares.
SEC 54F EXEMPTION:
Capital gains arising on sale of any long term capital asset shall be exempted u/s 54F if investment is made in ONE residential house property in India. Exemption available on the condition that the taxpayer (Parthasarathy(HUF)) does not own more than one residential house property at the time of purchase of the new house property.
WHO CAN CLAIM ?:
An Individual or HUF can claim exemption u/s 54F. Since the shares were sold from Partha’s HUF account, exemption can be claimed u/s 54F in the return of income of the HUF filed for AY 2021-22
TIME LIMIT
The new house property should be purchased within 1 year before or 2 years after the transfer of the capital asset. If constructed, the new house property must be constructed within 3 years from the date of transfer of the capital asset.
AMOUNT OF EXEMPTION
If amount invested in the new house property is more than the net sale consideration on sale of shares, entire capital gains shall be exempt u/s 54F. If amount invested in the new house property is less than the net sale consideration from sale of shares, then exemption shall be proportionate.
NOTE
The new house property should not be transferred within 3 years from the date of its purchase.
Within 3 years from the date of transfer of original asset (shares), Partha should not complete construction of another residential house property in HUF books.
Partha should not purchase another residential house property in HUF books within 2 years from the date of sale of the original asset (shares)
How can we help you?
Various clauses from the Income Tax Act may be simplified in online contents. But most of the time, it requires professional help in identifying suitable route for specific instances. Similar to nurturing and taking care of personal health, it is important to also keep a tab on one’s financial health. We at Chockalingam Unnamalai & Associates, can help you understand the pros and cons of various choices you make in the context of personal taxation. You can bank on us for a stress free tax filing and related compliances.
Call us at +91 73050 56628 or drop a mail to frontoffice@onesourcevault.com
ITR Filing – Why choose us?
Effective compliance is a key pillar for growing your finances and career/business. Tax compliance in particular could be cumbersome and at times very stressful. We help you to navigate through the maze of changes to tax laws with ease.
We understand and operate on the principle – “Time is money”. We have a reasonable turnaround time (TAT) which ensures timely tax compliance.
We understand the importance of data security and hence operate in a data-secure environment. Onboard us and experience certainty and value for money!
