Benefit on Sale of any capital assets (Section 54F)
The Income Tax Act, 1961 gives an individual or HUF who do not own a residential house a concession to purchase a residential house as and when they sell a Long Term Capital asset (for e.g. shares, bonds, debentures, motor car etc). When you sell a capital asset normally you are required to pay tax on the gain on the value of asset after the benefit of indexation. If however, you do not own a residential house you can reinvest the net consideration received from the sale of capital assets in a residential house property and if the amount invested is equal to or more than the net conideration no income tax is payable on such Long Term Capital gain. However, the following needs to be noted for claiming such benefit.
You should purchase the residential house within a period of one year before or two years after the date on which the transfer took place or construct a residential house within 3 years of such transfer.
You should not own more than one residential house property other than the new asset on the date of transfer of the original asset.
You should not purchase a residential house other than the new asset within a period of one year of construct any residential house other than new house within a period of three year after the date of transfer of the original asset .
Benefits on re-investment in house property (section 54)
Apart from this if an Individual or HUF reinvests in a residential house property i.e. invests the sale proceeds of a residential house property which has been held for more than 3 years in purchase of new house, such reinvestment is exempt from Capital Gains u/s 54 provided the new house is purchased/one year before or two years after the transaction or has constructed a residential house within a period of three years.
What are the other deductions available to me?
The following payments are eligible for rebate from tax to the extent of 20% of a maximum of Rs 20,000 (i.e. maximum rebate is up to Rs 4,000 p.a.). U/s 88 of the Income Tax Act
Any installment or part payment of the amount due under any self financing scheme of any development authority, housing board etc. engaged in construction and sale of house property or
Any installment or part payment of the amount due to any company or cooperative socieity of which the assessee is a share holder or member towards the cost of the house property allotted to him; or
Repayment of the amount borrowed by the assessee from:
- The Central or State Government
- Any bank (including cooperative bank)
- The Life Insurance Corporation of India
- The National Housing Bank
- Any Housing finance Company approved by National Housing Bank for the purpose of refinance
- Any public company or co-operative society that is engaged in business of financing construction of houses
- The assessee's employer where such employer is a public company or a public sector company or a university established by law or a college affiliated to such university or a local authority or a co-operative society
- Any of the above for payment of Stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee
What are the provisions of Wealth Tax Act and Gift Tax Act applicable to house property?
One house or a part of the house belonging to an Individual or a Hindu Undivided Family is not chargeable to Wealth Tax. Gift made after 1.10.98 does not attract levy of gift tax either in the hands of donor or done.
The purpose of this FAQ is to provide the visitors a general understanding of the law on Income from House Property. The above FAQ been prepared on the basis of advice received and may vary from person to person, based on facts of such case. Reasonable efforts have been taken in collecting, preparing and providing quality information, but we do not warrant or guarantee the accuracy, completeness, adequacy or currency of the information. You are requested to contact your tax consultant for specific problems / clarifications. The contents of the FAQ are subject to changes / amendments made by the CBDT / Finance Ministry.