Capital gains treatment in case of family settlement.

Pratyusha S (Staff Accountant)     20 February 2021

Hi All,

My Father in law passed away and as a result my husband and my mother in law who are the legal heirs are about to enter into a family settlement arrangement with my FIL's siblings. My Father in law has 3 other siblings, 2 sisters and one elder brother. The family property comprises of 2 lands of 18 cents each. Both the sisters are ready to relinquish their rights and 2 of the sons are allotted land of 18 cents each. Now, we have to pay a consideration of 2 crores to my FIL's elder brother to purchase his portion of 18 cents from him.

Query:

We will be buying the land from my FIL's brother on my husbands name. we have sold a flat of my husband in the previous year inorder to pay the consideration of 2 crores. Can i claim exemption under section 54 for investing the proceeds of the sale consideration in another residential house property even if it is payment of consideration in a family settlement arrangement. Also will this 2 crore be considered as cost of acquisition in future when i sell this property ?