Benefits of investing in Home

Can I save tax by investing in a residential house Investing in a house is a common Indian penchant. The Indian taxation law has also galvanised this desire considering the various incentives it confers for such investment.

According to the Income-Tax Act, 1961, a share in an unlisted company would qualify as a long term capital asset if held for more than 24 months. According to Section 54F of the Act, if the long term capital gains from the disposal of a long term capital asset (other than a house) are invested in a house, the taxpayer is eligible for deduction. The Section states the purchase of residential property should be completed within a year or two after the date of transfer and if construction should be completed within three years from the date of transfer. Let me explain with some oft-asked queries.

Owing to slow-down in the realty space, the builder was unable to complete the construction within the prescribed period. Can I claim the deduction If the taxpayer has invested in construction, even if it is incomplete and is unfit to occupy, it would not disentitle him/her from claiming the benefit. Once the taxpayer demonstrates that the consideration received on transfer has been invested in purchase or construction, he’s still eligible for benefits.

For evidence of purchase, is a sale deed required Can I invest in an under-construction property For claiming deduction, a registered sale deed is not essential as long as the related sums have been invested for the desired purposes. Courts have also held that even investment in under-construction property would entitle the taxpayer from claiming the related deduction.

Will I be eligible for deduction if the asset is purchased jointly in the name of my spouse The exemption under Section 54F is available even if the investment is made in the joint name with spouse.

(Sherry Samuel Oommen is a practising lawyer who specialises in tax and corporate laws)