Exemption under section 54 F

Exemption under section 54 F

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Issue

What will be the exemption available under section 54F of Income Tax Act 1961, where the capital gain is calculated on the basis of stamp duty value and the amount invested is more than the actual consideration?

Provision

Section 50C of Income Tax Act 1961

As per section 50C, full value of consideration is value adopted by stamp valuation authority, where the consideration received is less than value adopted by stamp valuation authority.

Section 54F of Income Tax Act 1961

Section 54F speaks about exemption allowed to individual /HUF on sale of long term capital asset other than residential building. If the consideration is invested in the residential house.

Exemption allowed:

   =LTCG       *      Amount invested in new residential house

                                        Net sale consideration

Gouli Mahadevappa Vs Income Tax Officer (Karnataka High Court)

In above case Stamp value was Rs 36 lakhs and actual consideration was Rs 20 lakhs, the assessee invested Rs 24 lakhs to claim benefit under section 54F. The Income Tax officer was of the opinion that only Rs 20 lakhs will be available as exemption under section 54F. The case was referred to High Court; High Court opined that the entire amount of Rs 24 lakhs will be available for exemption under section 54F, if the amount is invested within prescribed period.

Conclusion
The Karnataka High Court in Gouli Mahadevappa v. ITO (2013) 356 ITR 90 held that when capital gain is assessed as per the provisions of section 50C i.e. the stamp duty value under section 50C has been adopted as the full value of consideration, the amount reinvested in the residential house within the period prescribed should be considered for the purpose of exemption under section 54F, irrespective of the source of funds for such reinvestment.


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