Joint Ownership In An Existing Flat Will Not Bar Tax Benefit

Adding a spouse’s name to the ownership of a flat is quite common. It is important to note that there are numerous benefits to a recent ruling made by the Income-tax Appellate Tribunal’s (ITAT) Mumbai branch recently.

According to the ITAT, when a spouse sells another asset (such as shares, land, etc.) and reinvests the sale profits in another flat, it will not affect their ability to claim tax benefits under section 54-F of the Income-tax (I-T) Act, which relates to long-term capital gains, Times of India reported.

What is Section 54F?

The IT Act’s Section 54F permits an exemption on capital gains from the sale of any kind of property, excluding residential homes. The following requirements must be met for this exemption to apply: The taxpayer must use the net sales proceeds from the previous property to finance the acquisition of a new residential home. The following requirements must be met for this exemption to apply.

To purchase a new residential home, the taxpayer should use the net sales amount of the previous property.

The new residential property needs to be:

• Purchased: either two years or a year and a half after the asset was sold or
• Built: in three years following the sale of the previous asset

The taxpayer may only own the residential property that was purchased to qualify for this section’s exemption on the date of sale.

Section 54F can be claimed: Read how?

On long-term capital gains from the sale of any asset other than a residential property, Section 54F may be claimed. To be eligible for the full exemption, the entire net sale profits must be invested.

If a taxpayer sells any asset (other than real estate) and makes long-term capital gains, they can invest the net sale proceeds in residential real estate and avoid paying capital gains taxes. The amount of the exemption is based on the money used to purchase the new home. The exemption is proportionate if the investment exceeds the net sale consideration.

You must meet specific requirements to be eligible for this exemption. For beginners, on the date of the original asset’s sale, the taxpayer is not allowed to hold more than one residential property (apart from the new home in which the investment is being made).