529 Plan Limits
November 25th, 2008
Question: ltcg tax to be paid if house not bought/built within time limit prescribed in sec 54F?
Question from Dinesh Kumar Rohatgi, Lucknow, Mobile: 094 529 01900 on
Long Term Capital Gain Tax
I sold a residential plot for a consideration of Rs 7.0 Lakh on 26-02-2008, and invested this whole amount in Capital Gain FD in Dena Bank u/s 54 F on 17-06-2008, before filing my return, and showed the same in my return for AY 2008-09.
LTCG worked out was Rs 604346/=.
Now, I may not buy/construct a new house, as required u/s 54F. I am salaried employee, and am under 30% slab of tax. My questions are:
1.What is the rate & the amount of tax on this LTCG payable?
2.When/on what date/in which FY this amount is payable?
3.Is there any scheme of paying this tax in installments? If yes, pl give details.
4.I am planning expansion of an existing house. Can this tax be saved if the LTCG is spent on the same?
Answer: 1. 20% flat rate on LTCG.
2. If you do not want to construct, then show the gains this year and pay tax. You can withdraw the amount deposited in the bank. I think that you need a letter or no objection certificate from the concerned ITO to close the account. Contact the bank for how to close the account.
3. I think the time limit is over. Any way ask the Tax Consultant (CA) and take his advise.
4. 54F is not passable for expansion. Read:
Can You Claim Exemption u/s 54F for Modification or Expansion of An Existing House ?
No , said the Kerala High Court in Meera Jacob vs ITO [ dt of order 9/06/2008 ] 313 ITR 411 . The small order of Hon,ble High Court is as under :
The question involved is whether the assessee, in the computation of long term capital gains, is entitled to deduction under Section 54F of the Income tax Act in respect of investment in modification/expansion of an existing residential house.
The Tribunal took the stand that exemption is available only when the investment is in the construction of a house and not for investment in modification or renovation.
Admitted facts are that assessee had a fairly big house to which assessee made addition of 140 sq. metres of plinth area. However, it is the conceded position that assessee has not constructed any separate apartment or house.
Section 54F does not provide for exemption on investment in renovation or modification of an existing house. On the other hand, construction of a house only qualifies for exemption on the investment.
Even addition of a floor of a self-contained type to the existing house would have qualified for exemption. However, since the assessee has only made addition to the plinth area, which is in the form of modification of an existing house, she is not entitled to deduction claimed under Section 54F of the Act.
We therefore uphold the order of the Tribunal and dismiss the appeal.
Therefore, it is clear that no exemption is allowed for mere extension of the existing house. However, if yu create another floor and construct another house, exemption may be allowed .
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