I bought a Flat, with JOINT ownership with my wife, in December, 2021. The Conveyance Deed (amounting Rs.93.60 Lakh) was got executed & registered by the Builder in our favour in May, 2022. This Flat was earlier sold by the Builder to another person but the earlier owner never got executed/registered the conveyance deed and transfered/surrendered back the ownership on settlement of outstanding loan etc. by us, through finance by Bank, in December, 2021. We both are repaying the EMI for this joint property. Now, I have soldout my another house property (built in 2004 and was in single ownership in my name and not jointly with wife) in February, 2023 in Rs.90.00 lakh. Kindly let me know whether the capital gain of property sold by me can be adjusted against the property bought in JOINT TITLE / OWNERSHIP with wife.Thanks and Regards.
Ans: The provisions of Section 54 of Income Tax Act, which allows you to buy a residential property earlier and then sell some other residential property and adjust the LTCG (Long Term Capital Gains) of the latter into the former, is available only if the gap between the two transactions is One year or less.
In your case, you have written that you ‘bought’ the house in Dec 2021, and then ‘Conveyance Deed’ was done in May 2022. This is confusing since the applicability of Section 54 of Income Tax Act is specifically with ‘possession’ of the house.
If you got possession of the house in Dec 21, then the gap between possession of new house and sale of old house is more than One year and hence you cannot adjust the LTCG of the two properties.
If you got the possession of the new house in May 2022, then the Section 54 of Income Tax Act is applicable to you. Since the new house has been jointly bought and both of you have paid for it, then the LTCG of the sold house will be adjusted to the extent of your share in the newly bought house. If it gets fully adjusted, well-and-good. If not, then you will have to exercise other options (buy a property, buy 54EC bonds or pay the tax) as per Section 54.