Understanding exemptions under capital gains is crucial for taxpayers to optimize tax liabilities. Sections 54, 54B, 54D, 54EC, 54F, 54G, and 54GA offer various benefits to individuals and entities. This article delves into the specifics of each section, including eligible assets, time limits for acquisition, exemption amounts, lock-in periods, and applicable deposit schemes.
Each section of the Income Tax Act, including 54, 54B, 54D, 54EC, 54F, 54G, and 54GA, caters to different scenarios and asset types, ensuring comprehensive coverage. Individuals and Hindu Undivided Families (HUFs) can benefit from exemptions on long-term residential properties, agricultural lands, industrial undertakings, specified assets, and more.
Eligibility criteria, such as the type of taxpayer and asset, along with stipulated time frames for acquiring new assets, play a crucial role in availing exemptions. The amount of investment in new assets or capital gains, whichever is lower, determines the extent of exemption. Additionally, lock-in periods for new assets ensure adherence to tax regulations.
Deposit schemes under specific sections provide flexibility to taxpayers in fulfilling obligations. For instance, Section 54B mandates depositing the capital gain amount if new assets are not acquired within the specified time frame. Taxpayers must comply with deposit requirements to avail of exemptions fully.
Particulars |
Section 54 |
Section 54B |
Section 54D |
Section 54EC |
Section 54F |
Section 54G |
Section 54GA |
Applicable to |
Individual /HUF |
Individual/ HUF |
Any Person |
Any Person |
Individual /HUF |
Any Person |
Any Person |
Eligilble capital Assets Trd. |
Long term residential house property |
Short term/cLong term agricultural land if it was used by the individual or his parents for agricultural purposes for at least 2 years immediately prior to transfer |
Shor term/ long term land & building forming part of industrial undertaking which is compulsorily acquired by the Govt and which is used for 2 years for industrial purposes prior to its acquisition. |
Any long term capital asset(being land & building or both) |
Any long term capital assets other than residential house property |
Short term/ Long term land, Building and plant & machinery in order to shift an industrial under-taking from urban area to rural area |
Short term/ Long term land, Building and plant & machinery in order to shift an industrial undertaking from urban area to SEZ |
Assets acquire to get benefit |
Only 1 residential house in India. But from the assessment year 2020-21 if amount of capital gain does not exceed Rs 2Cr., The asseesee can purchase construct 2 residential house property but this concession is available only once in lifetime. |
Agricultural land (may be in rural area or urban area |
land and Building for residential purpose |
Long-term specified asset means any bond redeemable after 5 years, issued by the National Highways Authority of India (NHAI), the Rural Electrif-ication Corporation Ltd., Power Finance Corporation Limited, Indian Railway Finance Corporation Limited, any other bond being notified by the Central Government |
Only 1 residential house property in India |
land, Building and plant & machinery in order to shift an industrial undertaking from urban area to rural area |
land, Building and plant & machinery in order to shift an industrial undertaking from urban area to SEZ |
Time limit for acquiring new Assets |
Purchase before 1 year from date of transfer and within 2 years from the date of transfer but in case of construction with in 3 years construction to be completed |
With in 2 years from the date of transfer |
With in 3 years from the date of transfer |
With in 6 month from the date of transfer |
Purchase before 1 year from date of transfer and within 2 years from the date of transfer but in case of construction with in 3 years construction to be completed |
Purchase before 1 year from date of transfer and within 3 years from the date of transfer |
Purchase before 1 year from date of transfer and within 3 years from the date of transfer |
Exemption amount |
Amount of investment in new assets or capital gain, which ever is lower |
Amount of investment in new assets or capital gain, which ever is lower |
Amount of investment in new assets or capital gain, which ever is lower |
Amount of investment in new assets or capital gain, which ever is lower |
Investment in new assets/ net sale consideration *capital gain |
Amount of investment in new assets or capital gain, which ever is lower |
Amount of investment in new assets or capital gain, which ever is lower |
Lock in period for new assets |
3 years |
3 years |
3 years |
5 Years |
3 years |
3 years |
3 years |
Scheme of deposit applicable or not |
Yes |
Yes |
Yes |
No |
Yes |
Yes |
Yes |
Note:- 1 |
In case of acquisition of property by GOI then date of transfer is receipt date of compensation. |
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2 |
In case of section 54F lock in period or exemption can be revoked in following cases:- |
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a |
Purchased assets trd. With in 3 years |
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b |
If another residential house purchased with in 2 years from the date transfer of original assets |
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c |
If another residential house constructed with in 3 years from the date of transfer of original assets. |
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3 |
Cost of new assets can not be more than 10 CR. |
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Deposit scheme |
As per section 54B if the new assets is not acquired up to the due date of submission of return of income, then tax payer will have to deposit the money in the “capital gain deposit scheme” with a nationalised bank. The proof of deposit should be submitted along with return. On the basis of actual investment and the amount deposited in the deposit account, exemption will given to tax payer. |
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Note:- |
If new assets not acquired or if assets acquired amount is less than the amount deposited then balance in deposit account liable to tax in the previous years in which specified time limit expired. |
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Conclusion: Exemptions under capital gains, as outlined in sections 54, 54B, 54D, 54EC, 54F, 54G, and 54GA, offer valuable tax-saving opportunities to individuals and entities. By understanding the nuances of each section, taxpayers can strategically plan asset transactions to minimize tax liabilities. Adherence to eligibility criteria, time limits, and deposit scheme requirements is essential for maximizing benefits under these provisions.
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Would love to read more articles from the author!
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Very helpful and easy to understand….