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Reliefs available for property owners during construction

The exemption is subject to time limit for reinvestment and other conditions

What are the reliefs available to owner of property, when he converts part of it for construction under development agreement in respect of his liability for capital gains.

If what is given up for sale or development is a residential property, benefit of Sec. 54 is available to the extent of capital gains invested in another residential house within the specified period subject to conditions. But the interpretation of present law is uncertain, whether such reinvestment benefit under Sec. 54 will be available for reinvestment of more than one residential house. There are also other pitfalls. If demolition takes place before the transfer to the developer, what is transferred is only vacant land and not residential house property, so that the benefit under Sec. 54 will have no application.

The eligibility will be only under Sec. 54F, which is limited in scope. This relief is strictly confined to owners of not more than a single residential property limited to proportionate sale proceeds invested in a residential property in not more than one property.

In either case, whether under Sec. 54 or 54F, the exemption is subject to time limit for reinvestment and other conditions.

If there is cash flow available, reinvestment in approved bonds under Sec. 54EC will spare liability to the extent reinvested.

This is, therefore, a matter for competent professional advice to be taken in advance before entering into agreement with calculated risks in respect of doubtful issues, but with adequate safeguards.

There is no scope for advance ruling from the Income-tax Department as are available for non-residents presently in our law.

S. RAJARATNAM

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