Can you claim LTCG exemption on a jointly bought house? Income tax rules explained

Taxpayers selling residential property often face confusion around reinvesting capital gains and claiming tax exemption. A common question is whether an exemption on Long Term Capital Gains (LTCG) is available if a new residential house is purchased jointly, especially when the original property was held in a single name. The answer lies in the conditions prescribed under the Income Tax law governing reinvestment of capital gains.

Today's Q&A explains such details in response to a query by a reader.

The prescribed time period for a ready-to-move-in house is two years from the date of sale of the house or within one year before the sale of the house. In case you opt to go for self-construction or book an under-construction house property, a longer period of three years is available, within which period the construction needs to be completed.

The amount that is not utilised for acquiring the residential house by the due date of filing your Income Tax Return has to be deposited in a separate bank account under the Capital Gains Account Scheme. The unutilised long-term capital gains so deposited can be utilised for acquiring the residential house within the prescribed time period as stated above.

The law does not require the house to be acquired in the single name of the taxpayer for claiming this exemption. The exemption can still be claimed even if the house is acquired in joint names as long as the taxpayer has contributed the requisite amount for claiming this exemption. Even the order in which the house purchase agreement is executed is not relevant for this purpose as long as the other conditions are duly complied with.