Query regarding to sec.54 F

[pratik jain]

Dear Sir,
my query is relating to section 54F of Income Tax Act.

My client has long term capital gain of Rs. 30 lakhs from sale of Gold, he has purchased a house 1 year before for Rs. 35 Lakhs by borrowing loan from bank of Rs. 25 lakhs. All the conditions of section 54F are satisfied, I want to know what will be exemption he get?

Formula of 54F = 35,00,000*30,00,000/32,00,000

or = 10,00,0000*30,00,000/32,00,000

Which is correct for taking exemption

Pleas suggest me.

[sanjeev bajaj]

Dear Partik Jain

I persume that the net consideration of gold is Rs. 32 Lacs,  the investment in new house is Rs. 35 Lacs then the whole capital gain is not taxable is he repays the loan within the prescribed time.

 

Regards

Sanjeev bajaj

[pratik jain]

Thanks for giving reply,

Sir as you asked question "is he repays the loan within the prescribed time" here prescribed period means within 2 years as stated in S. 54F or any other period?

He is not paying loan now, he will pay loan in 15 years tenure, then what happened, is he will get exemption?

Please reply me sir it will very useful for me.

Thanking you

[CAGOPALJI AGRAWAL]

To my view, repayment of loan is not relevant for claiming the deduction u/s 54F. It has no relevance whether house has been purchased from own source or loan or the same money is being used.

AI Summary

Capital gains exemption under section 54F: loan repayment does not affect eligibility for residential property reinvestment relief. The query concerns computing capital gains exemption where sale proceeds were reinvested in a residential property partly financed by loan and whether loan repayment affects entitlement. The operative point is that entitlement depends on reinvestment in the new house within the statutory time limits and the apportionment of gain against the cost of the new property; several practitioners note that the source of funds or outstanding loan balance does not, by itself, disqualify the exemption.