under section 54

Query 1]

My father, who is 79 years old, is selling his 58 years old house at Itarsi (MP) in April 2013 and purchasing a 22 years old house at Raipur in March 2013. My queries are:

  1. How can my father claim LTCG when he is purchasing a house prior to selling his house?

  2. What will be the tax liabilities?

  3. What is the best legal mode of payment?

My father is a retired employee and has no source of income except some previous savings in Banks and PO. [Prantik]


  1. Long Term Capital Gain (LTCG) arising on sale of a residential house property could be claim as exempt under section 54 if the assessee invests the amount of LTCG for purchase or construction of another residential house property.
  2. Time limit to Purchase the Property:

    For exemption u/s 54, the Assessee have to invests the amount of LTCG in another residential house property: within the prescribed time limit as under:

    For purchase:

    The purchase could be One year before or two years after the date of transfer of original house; or

    For Construction:

    The construction should be complete within a period of three years from the date of the transfer of the original house.

  3. If the investment of the amount is done within the above specifie time period, no tax liability is there on the assessee.
  4. The assets sought to be acquire is a capital assets for the assessee and so no mode of payment is prescribe as such. Preferably, the transactions should be route through an account payee instruments.

Query 2]
  1. I am an employee in a PSU. I want to know that if a person deposits cash of Rs.1,00,000/- in my A/c from any other place, will that be treat as a cash transaction exceeding Rs.20,000/- and attract penalty?
  2. Secondly, I want to know if a person is not able to occupy his residence due to employment at some other place, will that property be treat as let-out or self-occupies? And can that person claim exemptions of HRA at the other place? If yes, how much amount & what are the conditions? Kindly guide me in these matters. [Meena Mohan-]


  1. The nature of receipts/deposits of Rs. 1 Lacs cash in your account is not mention in the query. If the amount accept is by way of loan, then the penalty can be invoke as section 269SS prohibits the acceptance of loan of Rs. 20,000/- or more in any moke other than by an account payee instruments. If the amount deposit is against any other transactions like as advance for purchase of property /other capital assets, or is a repayment of the loan take earlier by that person or in your capacity as an agent of that person to route the transactions etc, then in such cases, no penal consequence flow on the receiver of the amount.
  2. The property shall be treat as self occupied house property if:

    a] it is not  out or
    b] it could not occupied by the assessee due to his employment, business or profession at any other place.

  3. Exemption in respect of House Rent Allowance is regulate by Section 10(13A) read with Rule 2A of the Income Tax Rules, 1962. The least of following is exempt from tax:
  4. An amount equal to 50% of salary, where the residential house is situate at Bombay, Calcutta, Delhi or Madras OR an amount equal to 40% of salary where residential house is situate at any other place;
  5. House rent allowance received by the employee in respect of the period during which the rental accommodation is occupied by the employee during the previous year; or
  6. The excess of rent paid over 10% of salary.
    Following points need to be take in to consideration while calculating the amount of HRA admissible as exemption u/s 10(13A):
  7. “Salary” for the purpose of computation of exemptions u/s 10(13A) means Basic Salary and includes Dearness Allowance if terms of employment so provide. It also includes commission based on a fixed percentage of turnover achieved by an employee as per the terms of contract of employment AND EXCLUDES ALL OTHER ALLOWANCES & PERQUISITES.
  8. Exemption is not available where an employee lives in his own house, or in a house for which he doesn’t pay any rent.

Query 3]
I had sold my house recently. It is built in year 1980. I want to know how to calculate cost of construction? Constructed area is 3,200 sq.ft. Is there any CPWD construction cost for year 1981? The cost so obtain then can be multiple with the 3,200 sq.ft so as to get index Cost of construction for capital gain purpose? Please guide. []


It may be note that 01.04.1981 is the base year/date for calculating capital gain in case of property acquire before 01.04.1981. The indexation benefit, base on the fair market value of the property would be available, both for Land as well as Constructions. The best methodology to get the fair market value of the property (which includes Land as well as construction) as on 01.04.1981 is to get the valuation done from Government Approve valuer.

under section 54

[button color=”” size=”” type=”round” target=”” link=””]home[/button]  [button color=”” size=”” type=”round” target=”” link=””]Submit Article [/button]  [button color=”” size=”” type=”round” target=”” link=””]Discussion[/button]