Observe timelines for selling new assets, acquiring another

The Delhi High Court recently upheld Lata Goel’s claim for a ₹90 crore exemption under Section 54F of the Income Tax Act for the assessment year 2011-12. The exemption was against capital gains from the sale of FIITJEE Ltd shares, which she reinvested in purchasing a new residential house. The assessing officer (AO) opposed the claim, citing ownership of more than one residential property.

The AO relied on South Delhi Municipal Corporation records indicating Goel co-owned the basement and second floor of a property in Vasant Vihar, New Delhi, to argue that this disqualified her from being eligible for Section 54F. The court, however, disagreed.

Who can claim

Section 54F benefits are available only to individuals and Hindu Undivided Families (HUFs). “To be eligible, the person must have earned a long-term capital gain that is, from the sale of a capital asset held for more than 12 or 24 months, depending on the asset type,” says Neeraj Agarwala, partner, Nangia & Co.

The person must own only one property other than the new asset. “The purchase of multiple residential houses will also invalidate the exemption-even if done within the allowed timeline,” says Agarwala.

The taxpayer should not purchase another residential house within two years from the date of transfer of original asset, or construct another house within three years.

Publication – Business Standard

By Neeraj Agarwala