Article deals with Exemption from Long Term Capital Gain Tax under Section 54, 54EC, 54F of Income Tax Act, 1961. Article explains on Sale / Purchase of which Asset under which section exemption is eligible, condition for such exemption, Quantum of Deduction and Exceptions to Exemption under Section 54, 54EC, 54F of Income Tax Act, 1961.
| PARTICULARS | SECTION 54 | SECTION 54EC | SECTION 54F |
| SALE OF ASSET | Residential Property | Any Asset | Any Asset |
| PURCHASE OF NEW ASSET | Residential Property | Specified Bonds | Residential House |
| EXEMPTION CONDITIONS |
Purchase of another Residential Property within 1 year before or 2 years after the transfer of the Property sold and/or Construction of Residential House Property within a period of 3 years from the date of transfer/sale of property.
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If the assesse has within a period of 6 months after the due date of such transfer invested the capital gain in long term specified bonds as notified by the Govt. for a minimum period of 3 years. These specified bonds are usually issued by REC and NHAI and the Interest Rate offered is approx. 5.75%. Interest earned on these bonds is not tax-free. |
Purchase of one residential house within 1 year before or 2 years after the date of transfer of such an asset and/or Construction of 1 Residential House within 3 years after the date of such transfer.
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| QUANTUM OF DEDUCTION |
If the Capital Gains amount is equal to or less than the cost of the new house, then the entire capital gain shall be exempt If the amount of Capital Gain is greater than the cost of the new house, then the cost of the new house shall be allowed as an exemption. |
Capital Gains shall be exempt to the extent it is invested in the long term specified assets (subject to a maximum limit of Rs. 50 Lakhs) within a period of 6 Months from the date of such transfer. |
Capital Gains will be exempt in full if the entire sales consideration is invested.
In case the whole sale consideration is not invested and only a part of the sale consideration is invested, exemption shall be allowed proportionately i.e. Exemption will be (Capital Gain X Amount Invested)/Net Sale Consideration. |
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EXCEPTIONS TO EXEMPTIONS |
If the new property is sold within a period of 3 years from the date of its acquisition, then the cost of acquisition of this house property shall be reduced by the amount of capital gain exempt under section 54 earlier. The capital gain arising from this transfer will always be a short term capital gain. | In case where the long term specified asset is transferred or converted into money at any time within a period of 3 years from the date of its acquisition, the amount of capital gain exempt u/s 54EC, shall be deemed to be long term capital gain of the previous year in which the long term specified asset is transferred or converted into money. | The taxpayer has more than one residential house property on the date of transfer of the actual asset. However, the house that is bought to claim the exemption u/s 54F is exempted from this. |
Disclaimer: The Information contained in this document prepared is for Information purpose only. Please consult your professional before making any decision or taking any action using information contained in this document.
Author Bio
54EC is avilabele on Long-Term Capital Gain arising on the transfer of land or building or both (Amended by Finance Act, 2018)
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54F transfer of any long term capital asset, other than residential house property
I have sold 0ne flat 0n 11.12.2020 (RS.1.00 cr){LTCG of Rs.47lac } and one plot on 25.07.2021(Rs.13.00 lac).{LTCG of Rs.7.00 lac} Can i adjust these LTCG against purchase of one flat which was purchased on 16.12.2021 for Rs.1.00cr.? If yes then how I can adjust as the two LTCG are in different FY .Please advice. Thanks
Can we avail deduction of unused basic exemption limit say 200000 from the limit of 300000 l lakhs in case of senoir citizen after saving in Ltcg in 54ec bonds ?
Yes BASIC EXEMTION LIMIT can be adjusted again LTCG
Section 54F not Id. I have a query : I transferred a flat in the year 2008 to my son through family settlement. Now my son wants to transform the same flat back to me through family settlement and I want to sell the same flat immediately. Will this transaction will be treated STG or LTG? Will section 2(42A)(b) will be applicable on this transaction or not?
IT WILL BE CONSIDERED AS LONG TERM CAPITAL GAIN AND COST AND PERIOD WILL BE CONSIDERED FROM 2008 ie IN THE HANDS OF YOUR SON.
Very good presentation.
Please give us Capital Gain under Shares and Mutual Funds with long-term and short term. Also TDS on dividend, limit s and exemption.
Thankyou Sir.
Will provide the same as soon as possible.
Kindly let me know that , can we claim long term capital gain exemption for the construction of a building which is in the name of wife gain arrived from sale of a land.
We can claim the exemption even if the property we invest is in the name of dependents ie (wife , children etc).
However the construction should be done within 3years from the date of transfer of old asset.
You can also refer Shri Ramphal Hooda Vs ITO (ITAT Delhi) this case law.