Capital gain U/s 54

[gautamprajapati]

I purchased a house from builder in new construction in december - 2010. At that time only agreement to sell was made and on that basis i took laon from  bank. The Loan is disbursed upto 50% as the house is not constructed completely yet.

I have one other house which i have to sale now. The bank will disburse the loan completely in April-2012 and the sale deed will be made than.

In this case can is get deduction under section 54 of new house purchased before one year of sale?

Which date is considered while considering the one year before the sale U/s 54/ Whether it is the agreement to sale date or date of sale deed? The section speaks nothing clear about it.

[ashutosh majumdar]

S. 54 reads as follows:

Profit on sale of property used for residence.

54. [(1)] [ 1[Subject to the provisions of sub-section (2), where, in the case of an assessee 2 being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset 3 [***], being buildings or 4 lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head "Income from house property" (hereafter in this section referred to as the original asset), and the assessee has within a period of 5 [one year before or two years after the date on which the transfer took place purchased 6 ], or has within a period of three years after that date constructed, a residential house, then], instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,—

           (i)  if the amount of the capital gain 7 [is greater than the cost of 8 [the residential house] so purchased or constructed (hereafter in this section referred to as the new asset)], the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or

          (ii)  if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain.

You will "transfer" your flat in April 2012. So, the cut off date for purchase of one year prior to the date of transfer is April 2011. Any purchase earlier to that date will not be eligible. As your house is still under construction and you have not occupied it, you cannot be said to have "purchased" it till either the deed of conveyance is executed or you take possession. As that hasn't happened till date, you have nothing to worry about.