I’m planning to promote a plot which is within the identify of three brothers and use the sale proceeds in development of a residential home. The home to be constructed will likely be within the identify of two brothers. How can I avail tax advantages by utilising the sale proceeds in development of a residential home? Is there any approach for the third brother to get a tax break if his share can be invested in the home property?
— Chavali Sarveswarasarma
Sale of a plot is sale of a capital asset and the revenue on this case will get taxed as long run capital achieve after the indexation of value. The Revenue-tax Act permits taxpayers to say sure exemptions in opposition to capital positive factors. The exemption is out there beneath part 54F if the taxpayer would buy or assemble one residential home in India inside a interval of two/three years after the sale of any long-term capital asset or purchases one 12 months earlier than the date of switch.
We perceive that within the given case, you’re planning to promote a plot which is within the identify of three brothers and utilise all the sale proceeds to assemble a residential home on the plot which is within the identify of two brothers. Ordinarily, for claiming the revenue tax exemption u/s 54F, the brand new constructed home property must be co-owned collectively by each co-owner and it could be required that both the plot or any flooring of the constructed property is within the identify of third brother after the transaction is consummated.
Question answered by Amit Maheshwari, Tax Accomplice, AKM International, a tax and consulting agency. Ship your private finance queries at mintmoney@livemint.com to get them answered from consultants.
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