How can I declare tax break on sale proceeds of a plot?

I’m planning to promote a plot which is within the title of three brothers and use the sale proceeds in building of a residential home. The home to be constructed will likely be within the title of two brothers. How can I avail tax advantages by utilising the sale proceeds in building of a residential home? Is there any means for the third brother to get a tax break if his share can also be invested in the home property? 

— Chavali Sarveswarasarma

Sale of a plot is sale of a capital asset and the revenue on this case will get taxed as long run capital achieve after the indexation of price. The Income-tax Act permits taxpayers to assert sure exemptions in opposition to capital positive aspects. The exemption is offered beneath part 54F if the taxpayer would buy or assemble one residential home in India inside a interval of two/three years after the sale of any long-term capital asset or purchases one yr earlier than the date of switch. 

We perceive that within the given case, you’re planning to promote a plot which is within the title of three brothers and utilise your entire sale proceeds to assemble a residential home on the plot which is within the title of two brothers. Ordinarily, for claiming the earnings tax exemption u/s 54F, the brand new constructed home property must be co-owned collectively by each co-owner and it could be required that both the plot or any ground of the constructed property is within the title of third brother after the transaction is consummated.

Query answered by Amit Maheshwari, Tax Partner, AKM Global, a tax and consulting agency. Send your private finance queries at mintmoney@livemint.com to get them answered from specialists.

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