HOME BUYERS EXEMPTED FROM PAYING INCOME TAXES ON THE COST OF MAKING A NEW HOUSE HABITABLE

Homeowners can claim capital gain tax exemption against legitimate expenses for making the new house habitable before possession under Section 54 of the Income Tax Act 1961, according to a recent ruling from the Income Tax Appellate Tribunal (ITAT) Ahmedabad. The tax benefit would be available for repairing the new house to make it habitable. The taxpayer can deduct such expenses from the overall cost of the new property.The assessor had spent the cost of making the house habitable before taking ownership, according to the judgement.

The Tribunal cited a previous decision by the Coordinate Bench in Shrinvas R Desai vs ACIT (OSD), in which it was found that the buyer is not restricted from expending any construction cost on improvisation or additional work of a ready-made unit. According to the court, such additional expenses would qualify as a qualifying investment under Section 54 of the Act. The assessors’ request for a Rs 14 lakh deduction for expenses incurred in making the home habitable was granted. The Tribunal stated that “the assessee is considered to be entitled to the exemption” because the expenses were made within the specified time range and were not questioned by authorities.
A seller can claim a tax exemption on the capital gain realised through the transfer of a residential house property under Section 54 of the Income Tax Act 1961. This advantage is available to individuals and Hindu Undivided Families who invest capital gains from residential assets in the purchase or development of another residential property.

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