Income tax query: Can you get tax exemption by buying commercial property with sale deeds of unlisted shares?

By: | Published: September 20, 2017 3:24 AM

As such, you need to determine the cost based on the new methodology, i.e., the actual cost of previous owner or the fair value of the property as on April 1, 2001, whichever is higher.

Inherited property indexation on higher of cost to previous owner or fair market value on April 1, 2001 (PTI)

Inherited property indexation on higher of cost to previous owner or fair market value on April 1, 2001

• My father purchased a residential house in Himachal Pradesh in 1988. After his death in 2008, my mother inherited the property and after her death in 2016, the property was sold in April 2017. I, along with my three sisters, inherited the property with equal share. While computing the capital gain, starting from which year will indexation benefit be available?
– Gaurav Bisht

With respect to indexation benefit, there is a recent amendment in the Income Tax Act. As per the amendment, base year for calculating indexed cost of acquisition has been shifted from 1981 to 2001. Where the capital asset was acquired under the mode prescribed in Section 49 (1), which includes inheritance and the previous owner acquired the property before April 1 2001, now assessee will have the option to take higher of the cost of acquisition to previous owner or the fair market value of the asset on April 1, 2001. As such, you need to determine the cost based on the new methodology, i.e., the actual cost of previous owner or the fair value of the property as on April 1, 2001, whichever is higher. Thereafter, the indexation shall be available from 2001-02 and for your reference, note that the cost inflation index for the FY 2017-18 is 272.

• I sold some unlisted shares last month which were bought by me three years ago. I am planning to buy a commercial property using the said sale proceeds. My query is whether I will be eligible for any tax exemption?
—Niraj Saxena

Section 54F of the Income Tax Act provides for capital gain exemption if the net sale consideration on sale of any long term capital asset (in your case, unlisted shares) is invested in one residential house property within the specified time limit. Therefore, in the instant case you will not eligible to claim the capital gain exemption under Section 54F, if the sale consideration received is invested in a commercial property rather than a residential house property.

The writer is the founder of RSM Astute Consulting Group. Send your queries to fepersonalfinance@expressindia.com

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