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May 24, 2024
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Date of house possession key for tax benefit: ITAT
Income-tax Appellate Tribunal (ITAT), Mumbai bench, has recently held that in case of an under-construction property, it is the date of possession that must be considered to determine the eligibility of a tax benefit under section 54 of the Income-tax (I-T) Act.
This ruling is important, as for availing tax benefits, investment in a new house must be made within a specific period of time.To the extent of investment in the new house, the taxable component of long-term capital gains (which has arisen on sale of the old house) is reduced. This, in turn, results in a lower tax outgo.
According to this provision, the new house must be purchased within 'one-year prior' or 'two-years after' from date of sale of the old house. Or the new residential property can be constructed within three years from the date of sale of the original property.
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