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My Mother-in-law (aged-65) sold her 20 year old h…

My Mother-in-law (aged-65) sold her 20 year old house for 40L and buying new under construction pro…

My Mother-in-law (aged-65) sold her 20 year old house for 40L and buying new under construction property for 60L which will be completed in less than a year. however she is not having additional capital of 20L for new purchase so she wants to buy property jointly with her married daughter who will contribute rest of the 20L through bank loan. I've two questions on this proposition. 1. Is this joint purchase possible considering above scenarios? 2. Can we make joint property on 50:50 basis where Mother-in-law will invest 30L & daughter will take 30L loan? the remaining 10L with mother-in-law will be used for construction improvement, interior , repair work etc. before completing 2nd year of capital gain. is this possible? and will it exempt 40L under Sec.54F? Thanks for you advise.

Kanishka Aug. 11, 2018

Your mother-in-law should claim exemption under section 54 and not under section 54F.

Said above, here are the answers to your 2 questions:

1. Yes, she can do a joint purchase.

2. Joint property could be bought on 50:50 basis.

Before I answer this further, please understand that section 54 requires you to invest capital gain only. And not the entire sale price that you received.

If I assume the cost of old house as Rs5lac, then capital gain would be equal to Rs35lac. As your mother has already invested Rs30Lac so now she has a to invest remaining Rs5lac only.

She can invest Rs5lac in construction improvement etc. But please note this.

Either she should invest this Rs5lac before filing her tax returns or please have her deposit this Rs5lac in a bank under Capital Gains Account Scheme. Otherwise, she may have to pay taxes on this Rs5lac.