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|
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.
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
Construction of 1 Residential House within 3 years after the date of such transfer.
|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.
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.|
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