EXEMPTION U/s 54 I.T ACT,1961

[puneet virmani]

'A' SOLD RESIDENTIAL HOUSE (PURCHSED BY HIM IN 1974) FOR Rs.1 Cr IN AUG 2011, IN SEPT,2011 HE PURCHSED ANOTHER RESIDENTIAL FLAT FOR 1.20 CR IN NAME OF SELF 'A', HIS WIFE 'B' AND TWO MAJOR SONS'C &D'.. HE /HIS WIFE DOES NOT HOLD ANY OTHER RESIDENTIAL FLAT/ HOUSE.OUT OF THE SALE PROCEEDS OF Rs.1 CR. HE MADE GIFT OF Rs.75 LACS TO HIS ELDER SON. AND GOT HOUSING LOAN FOR Rs.85 LACS TO PURCHASE A NEW REIDENTIAL HOUSE. WHETHER 'A' IS ENTITLE TO CLAIM EXEMPTION U/S 54 OF THE  Income Tax Act. AS THERE ARE CERTAIN RULINGS THAT EXEMPTION IS AVAILABLE EVEN IF BORROWED FUNDS ARE UTILISED TO PURCHASE A NEW RESIDENTIAL HOUSE AS OTHER CONDITIONS MENTIONED U/S 54 ARE BEING SATISFIED.

AI Summary

Can an Individual Claim Section 54 Tax Exemption When Using Loan to Buy New Home After Sale? A discussion on a forum addressed whether an individual, 'A,' who sold a residential house and used borrowed funds to purchase a new one, can claim exemption under Section 54 of the Income Tax Act, 1961. The query highlighted that 'A' sold a house for Rs. 1 crore and later bought a new flat for Rs. 1.20 crore using a housing loan. The response cited various tribunal rulings, indicating that the exemption does not require the same funds from the sale to be used for the new purchase, as long as a residential house is acquired within the specified period.