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Unlocking Sec 54F Deduction How Nageshwar Leveraged Taxbuddy for Property Transaction Wisdom

About the Case:

In the bustling city of Bengaluru, Nageshwar found himself at a crossroads. The passing of his parents in 2019 left him with a significant responsibility—a prime open plot property. As the sole surviving child, the complete rights to the property now rested on his shoulders. However, the geographical distance between Nageshwar's current residence and the property triggered concerns about potential complications, such as unauthorized possession.

In his pursuit of a solution, Nageshwar contemplated selling the property through a broker, who, while promising a lucrative sale of 5 crores, also revealed the intricate web of tax implications attached. Feeling the weight of navigating this complex landscape, Nageshwar turned to—a beacon amid the sea of tax advisory portals.

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Issues faced By


Eligibility of Selling the Inherited Plot:

  • Can I sell the plot that my father purchased in 1989, considering its historical significance? How do the longevity and origin of ownership impact the legal and tax aspects of a potential sale?

Tax Liability on Transferred Property:

  • With the property transferred from my father to me, a natural query arises: Will this transfer incur any tax liabilities? What are the intricacies of tax regulations concerning inherited properties, and how do they apply to this transition?

Exploring Tax Saving Options on Plot Sale:

  • As I contemplate selling the plot, I am keen to understand proactive measures for tax savings. What legal avenues and strategic approaches can be employed to mitigate the tax burden associated with the sale, aligning with my broader financial goals?

Maximizing Tax Savings on a Lucrative Sale:

  • In anticipation of a potentially lucrative sale, my focus extends to quantifying the tax implications comprehensively. How much tax can be saved if the plot, initially acquired for 45 lakhs, is sold for 5 crores, considering the additional expenses incurred during the transfer process?

Impact of Future Property Transactions on Sec 54F:

  • Considering a future scenario where I purchase and subsequently sell a new house, a pertinent concern emerges: How does this affect the eligibility for Sec 54F exemption? Does the continuity of this exemption hinge on the specifics of subsequent property transactions within a certain timeframe?

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How TaxBuddy Helped

Eligibility of Selling the Inherited Plot:

  • Solution: Nageshwar, as the sole surviving child and legal heir, has the authority to sell the property once it is officially transferred to his name. This ensures a smooth and eligible sale.

Tax Liability on Transferred Property:

  • Solution: Inheriting the property under a will or through inheritance doesn't incur any tax liability. Nageshwar can proceed with the property transfer without additional tax implications.

Exploring Tax Saving Options on Plot Sale:

  • Solution:

    • Section 54EC Exemption: By investing in NHAI or RECL within six months of the transfer, Nageshwar can claim an exemption under Section 54EC, up to Rs. 50 Lakhs from capital gains.

    • Section 54F Exemption: If Nageshwar invests the net amount of the sale proceeds in the purchase of a residential property either one year before or two years after the date of transfer, or alternatively, constructs a house property within three years, he becomes eligible for a complete exemption on the entire capital gain. This provision is a strategic means to encourage investment in residential properties, offering a substantial tax benefit to individuals like Nageshwar, ensuring a seamless transition of capital without incurring additional tax burdens.

Maximizing Tax Savings on a Lucrative Sale:

  • Cost of Acquisition for Inherited Property:

    • The capital asset acquired through inheritance adopts the cost of purchase by Nageshwar's father, amounting to 45 lakhs.

  • Holding Period for Inherited Property:

    • The holding period for this inherited property is calculated from the date of acquisition by Nageshwar's father.

  • FMV on 1st April 2001:

    • The fair market value (FMV) of the plot of land on 1st April 2001 is determined to be Rs. 1,11,62,000.

  • Capital Gain Calculation:

  • Tax Calculation:

    • Taking indexation into consideration, the tax payable for this section is 20% of the capital gain, i.e., Rs. 25,17,586.

  • Tax Savings with Section 54F:

    • If Nageshwar chooses to invest Rs. 4,90,50,000 in a new residential property, he can claim the entire capital gain exempt under Section 54F, resulting in a substantial tax saving of Rs. 25,17,586.

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The Conclusion: 


Tax saving Journey

Nageshwar's journey with Taxbuddy unfolds as a testament to expert guidance navigating the complexities of property transactions. From establishing eligibility and alleviating tax concerns to strategizing for optimal savings on a significant sale, Taxbuddy proved indispensable. This case study illuminates the invaluable role Taxbuddy plays in empowering individuals like Nageshwar, ensuring a seamless transition through the intricate terrain of tax implications in property dealings.

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