If Investment exceed sale proceed Sec. 54f relief available

Sec. 54F relief available in entirety if investment exceeds sale proceeds, irrespective of usage of housing loan

• Section 54F read with section 263 of the Income-tax Act, 1961, Capital gains Exemption in case of investment in a residential house Where even before sale of agricultural land,
• Assessee borrowed housing loan and started construction on site belonging to him and after sale of agricultural land, amount spent towards construction of house was more than consideration received, assessee was entitled to benefit of section 54F
• {Commissioner of Income-tax-Bangalore vs Anandra  (HIGH COURT OF KARNATAKA}

FACTS

• Assessee filed his return of income which included capital gain. The Income tax Authority allowed to take the benefit u/s 54F to the assessee. Commissioner has been invoked his powers u/s 263 & reviewed the above said order.
• Commissioner found that Asessee had received a net consideration of INR 30 lakhs from the sale of agricultural land. The same was invested in a building & total investment of the building was INR 34 lakhs. Assessee had also availed a housing loan of Rs. 19.54 lakhs.
• AS per the view that the Assessing Authority had not taken into consideration the housing loan which was also invested in the construction of a house and therefore,
• He arrived at a conclusion that the order of the Assessing Authority was erroneous and prejudicial to the interest of the revenue.
• Tribunal held that the benefit extended to the assessee was strictly in conformity with section 54F.
• There is no scope for the different interpretation as sought to be made out by the Revisional Authority and therefore, he allowed the appeal setting aside the order passed by the Revisional Authority.
• In appeal, the question arose for consideration was whether fact that assessee had raised a housing loan for purpose of construction and he was claiming benefit of deduction of tax paid on housing loan if granted, would result in double benefit.

HELD

• It is not in dispute that the assessee sold the agricultural land and the consideration received is in the nature of a long-term capital gain.
• Even before the sale of the property, he had borrowed housing loan and started construction on the site belonging to him.
• After the sale, the amount spent towards construction of the house is more than the consideration received by the sale of agricultural land and therefore, he is entitled to the benefit of section 54F.
• Therefore, there is no infirmity in the order passed by the Tribunal which calls for interference. Accordingly, the substantial question of law is answered in favour of the assessee and against the revenue.

Conclusion 

• Where Assessee had completed all the required conditions of investment of equal sum of capital gain in purchase of residential house property eligible for getting the relief u/s 54F under income tax,
• Assessee would be entitled to exemption u/s 54F for total amount investment irrespective of the fact that part of such investment came from housing loan fund.
• Therefore No denial of section 54F capital gain relief just because few part of such investment was made out of housing loan.

FAQ’s Guide on Section 54F 

Claiming Exemption of LTCG Tax with Housing Loan

Q1.: What circumstance a Assesses can claim exemption U/s 54F?

• Assesses can be able to claim capital gains exemption U/s 54F of income tax act 1961 upon sale of any long term capital asset other than a residential house property.

Q2.: Is we can claim capital gains exemption u/s 54F by depositing in specified capital gains accounts scheme?

• Yes, we can claim exemption by depositing in specified capital gains accounts scheme before due date for filing tax return.

Q3.: Is we can claim capital gains exemption u/s 54F on sale of various properties?

• Assesses who sells off multiple properties & invests his all sale consideration proceeds into 1 house property can claim an exemption U/s 54F income tax act 1961. (Refer Judgment of  ACIT v Mahindra Kumar Jain).

Q4.: Who can Qualify to claim capital gains exemption U/s 54F of income tax Act?

• An HUF/individual can claim a capital gains exemption u/s 54F of Income Tax Act by investing in residential house property.

Q4.: What is availing Home Loan & Claiming Long term capital gain Exemption?

• As per present provision of income tax, If individuals & HUFs are allowed to take housing loan to purchase a new house property & still claim an exemption on the whole Loan & Claiming Long term resulting from the sale of the earlier long-term held capital assets. But In case you buy a new residential house property must be completed within 1 year of the sale of the last house property.
• The Loan & Claiming Long term being used to repayment of home loan is considered to be fulfilling the conditions set u/s 54 & Section 54F, and so you are permitted to claim an exemption on the complete Loan & Claiming Long term amount.

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