Capital Gain Deductions aren’t just for Property Owners: Here’s How you and your spouse can benefit

 Sections 54F and 54 of the Income Tax Act are beneficial provisions intended to provide relief to taxpayers and should therefore be construed liberally in favour of granting exemptions and deductions 

By Navasree A.M - On March 12, 2024 7:32 pm - 6 mins read



When it comes to capital gains tax, many people automatically think of property transactions. Investing in property is a significant financial decision, and many couples opt to buy property in one spouse’s name.

While this may seem straightforward, it’s essential to understand the implications, particularly regarding capital gains tax deductions. Here’s what you need to know about claiming capital gain deductions when buying property in your spouse’s name:

Understanding Capital Gains Capital gains tax is levied on the profit earned from the sale of assets such as property. When you sell a property for more than its purchase price, the profit is considered a capital gain and is subject to taxation. However, certain deductions and exemptions may apply, reducing the taxable amount.

 Analysis of Section 54 

The Section 54 of the Income Tax Act provides relief from capital gains tax arising from the sale of a residential property. It allows individuals to claim exemptions if they invest the capital gains from the sale of their property in purchasing or constructing another residential property within a specified period. The key points of Section 54 include:
Exemption Eligibility: Individuals can claim exemption under Section 54 if they reinvest the capital gains from the sale of a residential property in another residential property. Investment Timeline: The reinvestment must occur within a specified period to qualify for the exemption. Individuals can invest in a new property either one year before the sale or within two years after the sale. Amount of Exemption: The exemption amount is proportionate to the capital gains invested in the new residential property. If the entire sale proceeds are reinvested, the entire capital gains are exempt from tax.



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