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You can claim tax deduction on investment made in a residential house till September 30
June, 29th 2021

Keeping in mind the difficulties faced by taxpayers due to the second wave of the Covid-19 pandemic across the country, the Central Government on Friday extended the timeline for claiming a tax deduction on the investment made in a residential house till September 30. The time to invest in a residential house for tax deduction has been further extended for more than three months. The investment required to be made on or after April 1 can now be made till September 30.

“The compliances to be made by the taxpayers such as investment, deposit, payment, acquisition, purchase, construction or such other action, by whatever name called, for the purpose of claiming any exemption under the provisions contained in Section 54 to 54GB of the Act, for which the last date of such compliance falls between 1st April 2021 to 29th September 2021 (both days inclusive), may be completed on or before 30th September 2021,” the Ministry of Finance said in an official statement on Friday (June 25, 2021).

For the unversed, Section 54 and section 54GB of the Income Tax Act 1962 provide for exemption from long-term capital gains in case of an individual or HUF available on reinvestment of capital gains and reinvestment of sales proceeds respectively.

As per Section 54, one can avail tax exemptions from Capital Gains on selling a residential property if they re-invest it for purchase or construction of a residential property. Under section 54GB, the exemption is provided from capital gain arising out of the transfer of a residential property if the amount is invested for subscribing to the equity shares of the eligible company.

It is worth adding that the government in Union Budget 2019 extended the applicability of capital gain exemption under Section 54. It allowed the purchase or construction of two residential houses if the gain is less than Rs 2 crore. Note that a taxpayer can exercise this option only once. Earlier, only one purchase or construction was allowed.

Meanwhile, keeping the 7th pay commission (CPC) pay matrix and 7th CPC approval provisions in focus, the govt has updated the House Building Advance (HBA) guidelines for central government employees. HBA can be availed for remodeling of the existing house as well but the house has to be owned by the employee, its spouse or by both.

Central government employees, who have taken home loan from banks and other lending institutions, can also get this benefit provided they fulfill the terms and conditions in regard to HBA.

Ministry of Housing & Urban Affairs Housing-III issued an Office Memorandum (OM) in this regard and said, "Regarding House Building Advance (HBA) — 2017, the rate of interest on House Building Advance to central government employees will be @7.90% from 1st October 2020 to 31st March 2022 i,e,. for 18 months." So, those central government employees who have availed HBA benefit from 1st October 2020 will also get benefit of this order as they will also pay 7.90% interest on the advance.

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