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Query Answer
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Query

1)Sir If my clients mother gifted agriculture land ( 10 years old)without consideration to my client and said agriculture land is sold by my client to another person then the said capital gain to my client is short term capital gain or long term capital gain??
2) Capital gain out of above transaction invest by my client in construction of house property can he claim deduction u/s 54 F??
3) Can capital gain out of above transaction is used for the purpose of repayment of house loan taken 1 month before?? 
Can he claim deduction u/s 54 F??

Reply

Dear Sir,

1) The nature of capital gain depends on the holding period of asset, if the holding period of an asset is less than 36 months the gain will be treated as short term capital gain otherwise long term capital gain. In case of gift of capital asset, when the gift recipient sells such capital asset, the holding period is calculated from the date of purchase of such asset by donor instead of date of receipt of gift. Therefore, capital gains on sale of gifted property will be long term capital gains for your client.

2) Yes, your client can claim exemption u/s 54F if investment is made in construction of residential house property.

3)  Yes, you can claim exemption u/s 54F for repayment of loan provided that the said loan has been taken for purchase of property within one year from the date of arising of capital gain.
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