Income tax returns (ITR) filing: If I sell my house and buy two plots of land, one in each of my children’s names, can I claim long term capital gains exemption? Prashant Ranganathan

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Section 54 provides that the capital gains arising on the sale of a long term capital asset being a residential property shall be exempt from capital gain if the said capital gains are reinvested in another house property within stipulated time period. The section 54 provides exemption only in case of purchase or construction of one residential house property. Therefore, you will not be able to claim exemption under section 54 if you purchase two plots of land. Moreover, claiming the exemption of the property purchased in the name of children could be litigated by the tax officer as the section does not specify any provision.

I got a query about my income tax return of 2008-09. I had purchased my house that year. I have all the papers such as loan documents, etc to prove it. I am still repaying the loan. What all should I show the income tax officer? My husband is joint borrower and co-owner of the flat. Will he also have to show his papers- Nidhi Ramesh

To support the purchase of property, you may furnish the registered sale deed and loan agreement before the tax officer initially. However, if the tax officer desires to verify the purchase further, the other remaining documents can be furnished as and when required by the tax officer. It is advised to seek help of a consultant who would have a deeper insight of the facts.

I work in an IT firm which has headquarters in France. Ever year I invest Rs 1.5 lakh in my company’s shares under an employee benefit scheme. My company also contributes a certain amount for the shares. Next year I will be allowed to sell a part of my holdings, as five years will be complete. If I do sell the shares, what are the taxes I will have to pay? Shashank Raote

In the event of sale of Employee Stock Options (ESOPs) or shares received under employee benefit schemes, the difference between the sale consideration and the fair market value (FMV) on the date of exercise would be taxable as capital gains. The capital gains could be long term/ short term depending upon the period of holding.

By Suraj Nangia
(The writer is partner, Nangia Advisors LLP)