Section 54

Sec 54 Exemption Case — Key Timeline: Date of Purchase vs. Date of Sale

Important Dates

Date of Purchase:

The property in Powai was originally bought jointly by the wife and husband in 2002.

Transfer of Ownership:

In 2017, the husband gifted his 50% share in the property to his wife.

Date of Sale:

The wife sold the Powai property in 2020, resulting in a Long-Term Capital Gain (LTCG) of ₹4.21 crore.

How Dates Relate to Sec 54 Exemption

Sec 54 exemption applies to capital gains earned from selling a residential property, provided the seller reinvests the gains in another residential property within a specified period (typically within 2 years from date of sale).

In this case, after the 2020 sale, the wife purchased the husband’s share of another property (her husband’s flat) to claim the exemption, and paid the stamp duty and other costs shortly thereafter, as required under Sec 54.

Key point: The exemption was claimed on gains earned due to the 2020 sale, and the reinvestment was completed within the permitted period.

Summary Table

Event Date

Property Purchased 2002

Husband Gifted Share 2017

Property Sold (LTCG Event) 2020

Reinvestment (for Sec 54) Within 2 years after 2020 sale

Note

The critical timeline for claiming Sec 54 exemption revolves around the date of sale (2020 in this case) and ensuring the reinvestment is made within the allowed period afterwards.

The original date of purchase (2002) establishes the long-term nature of the capital asset. The date of sale (2020) triggers the capital gains tax event and starts the clock for Sec 54 eligibility.