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Can My Father Claim Tax Deduction on the New Property?

T S Khurana |186 Answers |Ask -Follow

Tax Expert - Answered on Aug 31, 2024

A certified management accountant since 1993, T S Khurana is a fellow member of The Institute of Cost Accountants of India. His areas of expertise are income tax, specifically litigation cases, and GST.

Since the last 21 years, he has also been providing expert advice on financial matters, including investments and diversification of funds, and wealth building in the long term to his clients.
He believes that investment in real estate is the safest way for better returns and wealth generation over a period of time.

A former chairman of the Chandigarh Chapter of Institute of Cost Accountants of India, T S Khurana has also served as member of its technical committee.... more

Asked by Anonymous - Aug 11, 2024Hindi

Money

My father is planning to sell one residential property and the proceeds of the sale plus loan that will be drawn by me (i.e. his son) would be consideration for purchasing of new property that would be under my name (I.e. his son). Will my father be able to claim deduction under sec 54 or should the new residential property be under his name only or can the new residential property can be under joint name? As per one of case laws this was allowed as deduction refer below summary: regards the name under whom the property is purchased, it can be seen that the son of the assessee is a direct relation and as per the Hon’ble Delhi High Court decision in case of CIT(A) Vs. Kamal Vahal 351 ITR 4 where the assessee purchased a new house in name of his wife, the claim under Section 54 is held valid. Thus, the exemption could not be denied if the entire investment had come out of the proceeds of an old property. Thus, the order of the CIT(A) is not justified in light of the decision in case of Kamal Vahal,” the Tribunal said Can you please confirm if my father can claim this exemption

Ans: 01. It is better to purchase the new house property in joint name of you & your father.
02. Exemption would be available u/s 54, even when the property is purchased in the name of Wife. Daughter or Son. Decisions of Tribunal/Court also support this version.
Most welcome for any further clarification. Thanks.

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.

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Hi Mr Mihir, I have in all four properties (inherited and purchased) which I am holding in the following manner – two of them 100% owned (one residence in which I am living & one shop), one 50% owned (residence) and one 25% owned (residence). Except for the one property in which I live, rest all are let out on rent and my co-owner in all the jointly owned properties is my sister. I am planning to sell the commercial property and purchase a residential property for better rent prospects. I want to know: Do I have to sell of all other residential properties as well (except the 100% owned residence where I live) to get the benefit of 54F while buying the new residential property (because then I won't have any other residential property except the one in which I live) OR Can I get the benefit of 54F by selling only the one commercial property and using the entire proceeds to buy the new residential property to be let out on rent (which means I will continue to hold 50% and 25% ownership of two other residential properties, as the second holder in both the cases). Also, in case you say that I must compulsorily sell all the jointly owned residential properties as well to get the benefit of 54F while buying the new residential property so that I have only ONE residential property when I go to buy the new residential property – will I get the benefit under 54F if I sell multiple properties and buy one single residential property which matches the amount of capital gain + sale proceeds of the commercial property? I also wanted to know that I may have to take a home loan while buying the new residential property (to be let out on rent), therefore, what would be the amount which I will be allowed as deduction from my total income as I have an existing home loan since 9 years on the 100% owned residential property in which I am living. I have always been a salaried class person with income under Rs 50 lakh and ALL the above-mentioned properties, related incomes and home loan etc are already disclosed in my IT returns. – SB

Ans: To get the benefit of Sec 54F, person should not own more than one house property on the date of transfer of asset and not on the date of acquiring new residential property.

Further, with reference to buying a single house property against capital gain from multiple long term capital asset, in my view, Sec 54F benefit is available if sale proceeds from all long term capital asset is invested in buying a single house property. However, it can be subject to litigation.

With reference to deduction on housing loan, principal repayment deduction upto 1.5 lacs in overall limit of 80C , 2 lacs deduction on interest on self occupied house property and entire interest deduction on loan for rented house property will be allowed. However, loss from house property can be set off upto 2 lacs against other income subject to other specified conditions

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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