Article discusses about Basic conditions for claiming exemption under section 54, Amount of exemption, Consequences if the new house is transferred, Computation of capital gains, Capital Gain Deposit Account Scheme, Non-utilisation of amount deposited in Capital Gain Deposit Account Scheme.
Introduction
A person wanted to shift his residence due to certain reason, hence, he sold his old house and from the sale proceeds he purchased another house. In this case the objective of the seller was not to earn income by sale of old house but to acquire another suitable house. If in this case the seller was liable to pay income-tax on capital gains arising on sale of old house, then it would be a hardship on him. Section 54 gives relief from such a hardship. Section 54 gives relief to a taxpayer who sells his residential house and from the sale proceeds he acquires another residential house. The detailed provisions in this regard are discussed in this part.
Basic conditions
Following conditions should be satisfied to claim the benefit of section 54.
- The benefit of section 54 is available only to an individual or HUF.
- The asset transferred should be a long-term capital asset, being a residential house property.
- Within a period of one year before or two years after the date of transfer of old house, the taxpayer should acquire another residential house or should construct a residential house within a period of three years from the date of transfer of the old house. In case of compulsory acquisition the period of acquisition or construction will be determined from the date of receipt of compensation (whether original or additional).
Exemption can be claimed only in respect of one residential house property purchased/constructed in India. If more than one house is purchased or constructed, then exemption under section 54 will be available in respect of one house only. No exemption can be claimed in respect of house purchased outside India.
With effect from Assessment Year 2021-22, the Finance Act, 2020 has amended Section 54 to extend the benefit of exemption in respect of investment made in two residential house properties. The exemption for investment made, by way of purchase or construction, in two residential house properties shall be available if the amount of longterm capital gains does not exceed Rs. 2 crores. If assessee exercises this option, he shall not be entitled to exercise this option again for the same or any other assessment year.
Illustration
Mr. Raja purchased a residential house in April, 2015 and sold the same in April 2022 for Rs. 8,40,000. Capital gain arising on sale of the house amounted to Rs. 1,00,000. Can he claim benefit of section 54 by purchasing/constructing another residential house from the capital gain of Rs. 1,00,000?
**
Exemption under section 54 can be claimed in respect of capital gains arising on transfer of capital asset, ‘being long-term residential house property. This benefit is available only to an individual or HUF. In this case, all the conditions as provided in section 54 are satisfied and hence, Mr. Raja can claim the benefit of section 54 by purchasing/constructing a residential house within the time-limit as provided under section 54.
Illustration
Mr. Raj purchased a residential house in April, 2021 and sold the same in April, 2022 for Rs. 8,40,000. Capital gain arising on sale of house amounted to Rs. 1,00,000. Can he claim benefit of section 54 by purchasing/constructing another residential house from the capital gain of Rs. 1,00,000?
**
Exemption under section 54 can be claimed in respect of capital gains arising on transfer of capital asset, being long-term residential house property. The period of holding in case of immovable property, being land or building or both, is reduced 24 months, to qualify as long-term capital asset. In this case the house property is sold after holding it for a period of less than 24 months and, hence, it is a short-term capital asset. The benefit of section 54 is not available in respect of a short-term capital asset and, hence, in this case Mr. Raj cannot claim the benefit of section 54.
Illustration
Kumar HUF purchased a residential house in April, 2016 and sold the same in April, 2022 for Rs. 8,40,000. Capital gain arising on sale of house property amounted to Rs. 1,00,000. Can the HUF claim the benefit of section 54 by purchasing a new house from the capital gain of Rs. 1,00,000?
**
Exemption under section 54 can be claimed in respect of capital gains arising on transfer of capital asset, being long-term residential house property. This benefit is available only to an individual or HUF. In this case all the conditions as provided in section 54 are satisfied and, hence, Kumar HUF can claim the benefit of section 54 by purchasing/constructing a residential house within the time-limit as provided under section 54.
Illustration
Mr. Raja purchased a residential house in April, 2016 and sold the same in April, 2022 for Rs. 8,40,000. Capital gain arising on sale of house amounted to Rs. 1,00,000. Can he claim the benefit of section 54 by purchasing a plot of land and then constructing a new house from the capital gain of Rs. 1,00,000?
**
Exemption under section 54 can be claimed in respect of capital gains arising on transfer of capital asset, being long-term residential house property. This benefit is available only to an individual or HUF. The benefit can be claimed by purchasing or by constructing a residential house. In this case, all the conditions as provided in section 54 are satisfied and, hence, Mr. Raja can claim the benefit of section 54 by constructing a residential house on the plot purchased by him within the time-limit as provided under section 54.
Illustration
Mr. Kumar purchased gold in April, 2016 and sold the same in April, 2022 for Rs. 8,40,000. Capital gain arising on sale of gold amounted to Rs. 1,00,000. Can he claim the benefit of section 54 by purchasing/constructing a house from the capital gain of Rs. 1,00,000?
**
Exemption under section 54 can be claimed in respect of capital gains arising on transfer of a capital asset, being long-term residential house property. In this case, the capital asset is gold, i.e., other than residential house and, hence, the benefit of section 54 is not available. However, in this case benefit can be claimed under section 54F subject to certain conditions as defined in that provision.
Illustration
Mr. Raja purchased a residential house in April, 2016 and sold the same in April, 2022 for Rs. 8,40,000. Capital gain arising on sale of house amounted to Rs. 1,00,000. Can he claim the benefit of section 54 by purchasing a shop from the capital gain of Rs. 1,00,000?
**
Exemption under section 54 can be claimed in respect of capital gains arising on transfer of a capital asset, being long-term residential house property. This benefit is available if another residential house is purchased form the capital gains. In other words, the benefit of section 54 is available if the capital gain arising on transfer of residential house is invested in another residential house. The benefit of section 54 is not available if the capital gain arising on transfer of house is invested in capital asset other than a residential house. In this case Mr. Raja wants to purchase a shop (i.e., capital asset other than a residential house) and, hence, the benefit of section 54 is not available.
Illustration
Mr. Parekh purchased a residential house in April, 2016 and sold the same on 25th April, 2022, for Rs. 8,40,000. Capital gain arising on sale of house amounted to Rs. 1,00,000. He had purchased a residential house in December, 2021 for Rs. 5,00,000. Can he claim the benefit of section 54 in respect of the house purchased in December, 2021?
**
Exemption under section 54 can be claimed in respect of capital gains arising on transfer of capital asset, being long-term residential house property. To claim exemption under section 54, another house should be purchased within a period of one year before or two years after the date of transfer of house. In this case the old house was transferred in April, 2022, hence, any house purchased within a period of 1 year before 25th April, 2022 can qualify for exemption under section 54. Hence, house purchased in December, 2021 will qualify for exemption under section 54.
Illustration
Mr. Chopra purchased a residential house in the previous year 2007-08 for Rs. 2 crores. The house property is sold for Rs. 3 crores in the previous year 2022-23 and the capital gain is invested in two residential house properties worth Rs. 1 crores each in same previous year. Can he claim the benefit of section 54 in respect of both houses?
* *
Exemption under section 54 can be claimed in respect of capital gains arising on transfer of capital asset, being long-term residential house property. With effect from Assessment Year 2020-21, a taxpayer has an option to make investment in two residential house properties in India to claim section 54 exemption. This option can be exercised by the taxpayer only once in his lifetime provided the amount of long-term capital gain does not exceed Rs. 2 crores.
Since, the gain arising in hands of Mr. Chopra is Rs. 1 crore, he can claim the benefit of section 54 by making investment in two house properties.
Illustration
Mr. Khan purchased a residential house in the previous year 2006-07 for Rs. 2 crores. The house property is sold for Rs. 10 crores in the previous year 2022-23 and the capital gain is invested in two residential house properties worth Rs. 4 crores each. Can he claim the benefit of section 54 in respect of both houses ?
* *
Exemption under section 54 can be claimed in respect of capital gains arising on transfer of capital asset, being long-term residential house property. With effect from Assessment Year 2021-22, a taxpayer has an option to make investment in two residential house properties in India to claim section 54 exemption. This option can be exercised by the taxpayer only once in his lifetime provided the amount of long-term capital gain does not exceed Rs. 2 crores.
Since, the gain arising in hands of Mr. Khan is more than Rs. 2 crore, he cannot claim the benefit of section 54 by making investment in two house properties.
Illustration
Mr. Anil sold his residential house on January 02, 2023 for Rs. 10 crores which was purchased by him 10 year ago for Rs. 8 crore. Mr. A bought a new residential house on February 01, 2022 and on March 01, 2024 worth Rs. 1 crore each.
Exemption under section 54 can be claimed in respect of capital gains arising on transfer of capital asset, being long-term residential house property. With effect from Assessment Year 2021-22, a taxpayer has an option to make investment in two residential house properties in India to claim section 54 exemption. This option can be exercised by the taxpayer only once in his lifetime provided the amount of long-term capital gain does not exceed Rs. 2 crores.
The option to claim capital gain exemption under Section 54, in respect of two houses, shall be available as the amount of capital gains does not exceed Rs. 2 crores.
As the original residential house is transferred on January 02, 2023, the new house should be purchased within one year before and two years after the date of transfer. In other words, the new asset purchased between January 3, 2022 and January 01, 2025 shall be eligible for exemption under Section 54.
As the first house is purchased on February 01, 2022, within 1 year before the date of transfer of original asset, and second house is purchased on March 01, 2024, within 2 years after the date of sale of original residential house, investment in both the new houses are eligible for section 54 exemption.
Amount of exemption
Exemption under section 54 will be lower of following :
- Amount of capital gains arising on transfer of residential house; or
- Amount invested in purchase/construction of new residential house property [including the amount deposited in Capital Gains Deposit Account Scheme (discussed later)].
Illustration
Mr. Raja purchased a residential house in April, 2016 and sold the same on 25th April, 2022 for Rs. 8,40,000. Capital gain arising on sale of house amounted to Rs. 1,00,000. Out of the sale proceeds of old house, he purchased another residential house for Rs. 80,000. This house was purchased in May, 2022. What will be the amount of exemption under section 54 which can be claimed by Mr. Raja?
**
Exemption under section 54 can be claimed in respect of capital gains arising on transfer of capital asset, being long-term residential house property. Exemption under section 54 will be lower of the following :
- Amount of capital gains arising on transfer of residential house; or
- Amount invested in purchase/construction of new residential house property
Considering the above provisions, the exemption in this case will be lower of the following amount :
- Amount of capital gain, i.e., Rs. 1,00,000.
- Amount of investment in new house, i.e., Rs. 80,000
Thus, exemption will be Rs. 80,000. Taxable capital gain will come to Rs. 20,000 (Rs. 1,00,000 less exemption under section 54 of Rs. 80,000).
Illustration
Mr. Kapoor purchased a residential house in April, 2016 and sold the same on 25th April, 2022 for Rs. 8,40,000. Capital gain arising on sale of house amounted to Rs. 1,00,000. Out of the sale proceeds of old house, he purchased another residential house for Rs. 1,20,000. This house was purchased in May, 2022. What will be the amount of exemption under section 54 which can be claimed by Mr. Kapoor?
**
Exemption under section 54 can be claimed in respect of capital gains arising on transfer of capital asset, being long-term residential house property. Exemption under section 54 will be lower of following :
- Amount of capital gains arising on transfer of residential house; or
- Amount invested in new residential house property
Considering the above provisions, the exemption in this case will be lower of the following amount :
- Amount of capital gain, i.e., Rs. 1,00,000.
- Amount of investment in new house, i.e., Rs. 1,20,000 Thus, exemption will be Rs. 1,00,000.
Taxable capital gain will come to Nil (entire gain will be exempt).
Consequences if the new house is transferred
Exemption under section 54 is available in respect of rollover of capital gains arising on transfer of residential house into another residential house. However, to keep a check on misutilisation of this benefit, a restriction is inserted in section 54. The restriction is in the form of prohibition of sale of the new house.
If a taxpayer purchases/constructs a house and claims exemption under section 54 and then transfers the new house within a period of 3 years from the date of its acquisition/completion of construction, then the benefit granted under section 54 will be withdrawn. The ultimate impact of the restriction is as follows:
- The restriction will be attracted, if after claiming exemption under section 54, the new house is sold before a period of 3 years from the date of its purchase/completion of construction.
- If the new house is sold before a period of 3 years from the date of its purchase/completion of construction, then at the time of computation of capital gain arising on transfer of the new house, the amount of capital gain claimed as exempt under section 54 will be deducted from the cost of acquisition of the new house.
Illustration
Mr. Rajat sold his old house in April, 2021 for Rs. 25,20,000. Long-term capital gain arising on transfer of old house amounted to Rs. 8,40,000. In December, 2021 he purchased another residential house worth Rs. 10,00,000. The new house was however, sold in April, 2022 for Rs. 12,00,000 (stamp duty value of the new house was Rs. 10,00,000). What will be amount of taxable capital gains in the hands of Mr. Rajat for the financial years 2021-22 and 2022-23?
**
Computation of capital gains for the financial year 2021-22
|
Particulars |
Rs. |
| Long-term capital gain arising on transfer of old house | 8,40,000 |
| Less: Exemption under section 54 (*) | 8,40,000 |
| Taxable long-term capital gains | Nil |
(*) Exemption under section 54 will be lower of following :
- Amount of capital gains arising on transfer of residential house; or
- Investment in new residential house property
Considering the above provisions, the exemption in this case will be lower of the following amount :
- Amount of capital gain, i.e., Rs. 8,40,000.
- Amount of investment in new house, i.e,. Rs. 10,00,000
Thus, exemption will be Rs. 8,40,000.
Computation of capital gains for the financial year 2022-23
If a taxpayer purchases/constructs a house and claims exemption under section 54 and then the new residential house property is transferred within a period of 3 years from the date of its acquisition/completion of construction, then the benefit granted under section 54 will be withdrawn. The computation in this case will be as follows :
| Particulars | Rs. |
| Full value of consideration (i.e., Sales value) | 12,00,000 |
| Less: Expenditure incurred wholly and exclusively in connection with transfer of capital asset (E.g., brokerage, etc.). | Nil |
| Net sale consideration | 12,00,000 |
| Less: Cost of acquisition of the house (*) | 1,60,000 |
| Taxable short- term capital gains on sale of new house | 10,40,000 |
(*) If the new house is sold before a period of 3 years from the date of its purchase/completion of construction, then at the time of computation of capital gain arising on transfer of the new house, the amount of capital gain claimed as exemption under section 54 will be deducted from the cost of acquisition of the new house. Applying this provision, the cost of acquisition of new house will be computed as follows:
| Particulars | Rs. |
| Actual cost of acquisition of new house | 10,00,000 |
| Less: Exemption claimed earlier under section 54 | 8,40,000 |
| Cost of new house to be used while computing capital gain | 1,60,000 |
Illustration
Mr. Rajat sold his old house in April, 2021 for Rs. 25,20,000. Long- term capital gain arising on transfer of old house amounted to Rs. 8,40,000. In December, 2021 he purchased another residential house worth Rs. 5,00,000. The new house was however, sold in April, 2022 for Rs. 12,00,000 (stamp duty value of the new house was Rs. 10,00,000). What will be amount of taxable capital gains in the hands of Mr. Rajat for the financial years 2021-22 and 2022-23?
**
Computation of capital gains for the financial year 2021-22
|
Particulars |
Rs. |
| Long- term capital gain arising on transfer of old house | 8,40,000 |
| Less: Exemption under section 54 (*) | 5,00,000 |
| Taxable long- term capital gains | 3,40,000 |
(*) Exemption under section 54 will be lower of following :
- Amount of capital gains arising on transfer of residential house, or
- Investment in new residential house property
Considering the above provisions, the exemption in this case will be lower of the following amount :
- Amount of capital gain, i.e., Rs. 8,40,000.
- Amount of investment in new house, i.e., Rs. 5,00,000
Thus, exemption will be Rs. 5,00,000.
Computation of capital gains for the financial year 2022-23
If a taxpayer purchases/constructs a house and claims exemption under section 54 and then the new residential house property is transferred within a period of 3 years from the date of its acquisition/completion of construction, then the benefit granted under section 54 will be withdrawn. The computation in this case will be as follows :
|
Particulars |
Rs. |
| Full value of consideration (i.e., Sales value) | 12,00,000 |
| Less: Expenditure incurred wholly and exclusively in connection with transfer of capital asset (E.g., brokerage, etc.). | Nil |
| Net sale consideration | 12,00,000 |
| Less: Cost of acquisition (*) | Nil |
| Taxable short- term capital gains on sale of new house | 12,00,000 |
(*) If the new house is sold before a period of 3 years from the date of its purchase/completion of construction, then at the time of computation of capital gain arising on transfer of the new house, the amount of capital gain claimed as exemption under section 54 will be deducted from the cost of acquisition of the new house. Applying this provision, the cost of acquisition of new house will be computed as follows:
|
Particulars |
Rs. | |
| Actual cost of acquisition of new house * | 5,00,000 | |
| Less: Exemption claimed earlier under section 54
Cost of new house to be used while computing capital gain |
5,00,000 Nil |
|
Capital Gain Deposit Account Scheme
To claim exemption under section 54, the taxpayer should purchase another house within a period of one year before or two years after the date of transfer of old house or should construct another house within a period of three years from the date of transfer. If till the date of filing the return of income, the capital gain arising on transfer of the house is not utilised (in whole or in part) to purchase or construct another house, then the benefit of exemption can be availed by depositing the unutilised amount in Capital Gains Deposit Account Scheme in any branch of public sector bank, in accordance with Capital Gains Deposit Accounts Scheme, 1988 (hereafter referred as Capital Gains Account Scheme). The new house can be purchased or constructed by withdrawing the amount from the said account within the specified time-limit of 2 years or3 years, as the case may be.
Illustration
Mr. Raj is a salaried employee. He had purchased a residential house in April, 2016 and sold the same on 25th April, 2022 for Rs. 8,40,000. Capital gain arising on sale of house amounted to Rs. 2,00,000. He wants to claim exemption under section 54 by purchasing another residential house. By what time he should purchase or construct another residential house?
**
To claim exemption under section 54, the taxpayer should purchase another house within a period of one year before or two years after the date of transfer of old house. In this case, the old house is transferred on 25th April, 2022, hence, he has to purchase another house within a period of 2 years from 25th April, 2022; alternatively he can construct another house within a period of 3 years from 25th April, 2022.
The old house is transferred in the year 2022-23 and the due date of filing the return of income of the year 2022-23 is 31st July, 2023. If Mr. Raj cannot purchase/construct another house by 31st July, 2023, then he has to deposit Rs. 2,00,000 in Capital Gains Account Scheme. By depositing Rs. 2,00,000 in the Capital Gains Account Scheme he can claim exemption of Rs. 2,00,000 under section 54. However, merely depositing the sum in the Capital Gains Account Scheme would not be sufficient; after deposit in the scheme he has to utilise this fund to purchase/construct the house within the specified period of 2 years/3 years, as the case may be.
Illustration
Mr. Rajan is a salaried employee. He had purchased a residential house in April, 2016 and sold the same on 25th, April, 2022 for Rs. 18,40,000. Capital gain arising on sale of house amounted to Rs. 4,00,000. He could not purchase/construct another house by 31st July, 2023, however, in July, 2023 he deposited Rs. 4,00,000 in Capital Gains Account Scheme. Will he be entitled to claim any exemption under section 54?
**
To claim exemption under section 54, the taxpayer should purchase a residential house within a period of one year before or two years after the date of transfer of old house or can construct a house within a period of three years from the date of transfer. In this case, the old house was transferred on 25th April, 2022, hence, he has to purchase another house within a period of 2 years from 25th April, 2022. Alternatively, he can construct another house within a period of 3 years from 25th April, 2022.
The old house is transferred in the year 2022-23 and the due date of filing the return of income of the year 2022-23 is 31st July, 2023. If Mr. Rajan can not purchase/construct another house by 31st July, 2023, then he has to deposit Rs. 4,00,000 in Capital Gains Account Scheme. By depositing Rs. 4,00,000 in the Capital Gains Account Scheme he can claim exemption of Rs. 4,00,000 under section 54. In this case, he has deposited Rs. 4,00,000 in the Capital Gains Account Scheme and, hence, he can claim exemption of Rs. 4,00,000 under section 54. To continue the exemption he has to utilize the funds deposited in the scheme to purchased/construct the house within the specified period of 2 years/3 years, as the case may be.
Illustration
Mr. Vipul is a salaried employee. He had purchased a residential house in April, 2015 and sold the same on 25th April, 2022 for Rs. 18,40,000. Capital gain arising on sale of house amounted to Rs. 4,00,000. He could not purchase/construct another house by 31st July, 2023, however, in October, 2023 he deposited Rs. 4,00,000 in Capital Gains Account Scheme. Will he be entitled to claim any exemption under section 54?
**
To claim exemption under section 54 the taxpayer should purchase a residential house within a period of one year before or two years after the date of transfer of old house or can construct a house within a period of three years from the date of transfer. In this case, the old house was transferred on 25th April, 2022, hence, he has to purchase another house within a period of 2 years from 25th April, 2022. Alternatively he can construct another house within a period of 3 years from 25th April, 2022.
The old house was transferred in the year 2022-23 and the due date of filing the return of income of the year 2022-23 is 31st July 2023. If Mr. Vipul cannot purchase/construct another house by 31st July, 2023, then he has to deposit Rs. 4,00,000 in Capital Gains Account Scheme by 31st July, 2023 (i.e., by the due date of filing the return of income). The amount deposited in the Capital Gains Account Scheme till 31st July, 2023 will be taken into account to ascertain the exemption under section 54.
In this case, Mr. Vipul has deposited Rs. 4,00,000 in Capital Gains Account Scheme, but has deposited in October, 2023 (i.e., after 31st July) and, hence, he cannot claim exemption in respect of the amount deposited in the scheme. Thus, exemption under section 54 will be Nil.
Non-utilisation of amount deposited in Capital Gain Deposit Account Scheme
If the amount deposited in the Capital Gains Account Scheme in respect of which the taxpayer has claimed exemption under section 54 is not utilised within the specified period for purchase/construction of the residential house, then the unutilised amount (for which exemption is claimed) will be taxed as income by way of long- term capital gains of the year in which the specified period of 2 years/3 years gets over.
Illustration
Mr. Ramlal is a salaried employee. He had purchased a residential house in April, 2015 and sold the same on 25th April, 2022 for Rs. 25,20,000. Capital gain arising on sale of house amounted to Rs. 5,00,000. He could not purchase/construct another house by 31st July, 2023, however, in July, 2023 he deposited Rs. 5,00,000 in Capital Gains Account Scheme. He did not purchase any residential house nor constructed any house till 24th April, 2025. Will he be entitled to claim any exemption under section 54? If yes, will the exemption granted be revoked subsequently?
**
To claim exemption under section 54, the taxpayer should purchase a residential house within a period of one year before or two years after the date of transfer of old house or can construct a house within a period of three years from the date of transfer. In this case, the old house was transferred on 25th April, 2022, hence, he has to purchase another house within a period of 2 years from 25th April, 2022. Alternatively, he can construct another house within a period of 3 years from 25th April, 2022.
The old house was transferred in the year 2022-23 and the due date of filing the return of income of the year 2022-23 is 31st July, 2023. If Mr. Ranmal cannot purchase/construct another house by 31st July 2023, then he has to deposit Rs. 5,00,000 in Capital Gains Account Scheme. By depositing Rs. 5,00,000 in the Capital Gains Account Scheme he can claim exemption of Rs. 5,00,000 under section 54. In this case, he has deposited Rs. 5,00,000 in the Capital Gains Account Scheme and, hence, he can claim exemption of Rs. 5,00,000 under section 54. In other words, exemption under section 54 for the year 202223 will come to Rs. 5,00,000.
He has to utilise the funds deposited in the scheme to purchase/construct the house within the specified period of 2 years/3 years. If he does not purchase/construct the house within a period of 2 years/3 years, then the amount (for which exemption is claimed) will be taxed as income by way of long-term capital gains of the year in which the specified period gets over.
In this case the period of 2 years gets over on 24th April, 2024 and the period of 3 years gets over on 24th April, 2025 Mr. Ranmal has not purchased any house till 24th April, 2024 nor constructed any house till 24th April, 2025, hence, the exemption of Rs. 5,00,000 allowed in the year 2022-23 will be revoked and will be taxed as income by way of long- term capital gains for the financial year 2025-26.
Illustration
Mr. Khush is a salaried employee. He had purchased a residential house in April, 2013 and sold the same on 25th April, 2022 for Rs. 25,20,000. Capital gain arising on sale of house amounted to Rs. 5,00,000. He could not purchase/construct another house by 31st July, 2023, however, in July, 2023 he deposited Rs. 5,00,000 in Capital Gains Account Scheme. In January, 2024, he withdrew Rs. 4,00,000 from the Capital Gains Account Scheme and purchased a residential house. Thereafter, he did not purchase any residential house nor constructed any house till 24th April, 2024. Will he be entitled to claim any exemption under section 54? If yes, will the exemption granted be revoked subsequently?
**
To claim exemption under section 54, the taxpayer should purchase a residential house within a period of one year before or two years from the date of transfer of old house or can construct a house within a period of three years from the date of transfer. In this case, the old house was transferred on 25th April, 2022, hence, he has to purchase another house within a period of 2 years from 25th April, 2022. Alternatively, he can construct another house within a period of 3 years from 25th April, 2022.
The old house was transferred in the year 2022-23 and the due date of filing the return of income of the year 2022-23 is 31st July 2023. If Mr. Khush cannot purchase/construct another house by 31st July 2023, then he has to deposit Rs. 5,00,000 in Capital Gains Account Scheme. By depositing Rs. 5,00,000 in the Capital Gains Account Scheme he can claim exemption of Rs. 5,00,000 under section 54. In this case, he has deposited Rs. 5,00,000 in the Capital Gains Account Scheme and, hence, he can claim exemption of Rs. 5,00,000 under section 54. In other words, exemption under section 54 for the year 202223 will come to Rs. 5,00,000.
He has to utilise the amount deposited in the scheme (i.e., Rs. 5,00,000) to purchase/construct the house within the specified period of 2 years/3 years. If he does not purchase/construct the house within a period of 2 years/3 years, then the unutilised amount (for which exemption is claimed) will be taxed as income by way of long- term capital gains of the year in which the specified period gets over.
In this case the period of 2 years gets over on 24th April, 2024 and the period of 3 years gets over on 24th April, 2025. Hence, Mr. Khush has to purchase a residential house of Rs. 5,00,000 upto 24th April, 2024. Since he has utilized only Rs. 4,00,000 for purchase of a house property in January, 2024 and Section 54 allows exemptions for investment in one house only. The unutilised amount of Rs. 1,00,000 will be taxed as income by way of long- term capital gains in the year of expiry of the specified period.
In other words, the exemption of Rs. 1,00,000 (representing unutilised amount) allowed in the year 2022-23will be revoked and will be taxed as income by way of long-term capital gains for the year 2024-25.
Illustration
Mr. Raju is a salaried employee. He had purchased a residential house in April, 2015 and sold the same on 25th April, 2022 for Rs. 18,40,000. Capital gain arising on sale of house amounted to Rs. 3,00,000. He could not purchase/construct another house by 31st July, 2023, however, in July, 2023 he deposited Rs. 5,00,000 in Capital Gains Account Scheme. He did not purchase any residential house nor constructed any house till 24th April, 2025. Will he be entitled to claim any exemption under section 54? If yes, will the exemption granted be revoked subsequently?
**
To claim exemption under section 54, the taxpayer should purchase a residential house within a period of one year before or two years after the date of transfer of old house or can construct a house within a period of three years from the date of transfer. In this case the old house was transferred on 25th April, 2022, hence, he has to purchase another house within a period of 2 years from 25th April, 2022. Alternatively, he can construct another house within a period of 3 years from 25th April, 2022.
The old house was transferred in the year 2022-23 and the due date of filing the return of income of the year 2022-23 is 31st July 2023. If Mr. Raju cannot purchase/construct another house by 31st July 2023, then he has to deposit Rs. 3,00,000 in Capital Gains Account Scheme. By depositing Rs. 3,00,000 in the Capital Gains Account Scheme he can claim exemption of Rs. 3,00,000 under section 54. In this case he has deposited more amount, i.e., Rs. 5,00,000 in the Capital Gains Account Scheme, however, he will be entitled to claim exemption only on Rs. 3,00,000. In other words, exemption under section 54 for the financial year 2022-23 will be Rs. 3,00,000.
He has to utilise the funds deposited in the scheme to purchase/construct the house within the specified period of 2 years/3 years. If he does not purchase/construct the house within a period of 2 years/3 years, then the amount (for which exemption is claimed) will be taxed as income by way of long-term capital gains of the year in which the specified period gets over.
In this case the period of 2 years gets over on 24th April, 2024 and the period of 3 years gets over on 24th April, 2025. Mr. Raju has not purchased any house till 24th April, 2024 nor constructed any house till 24th April, 2025. Hence, the exemption of Rs. 3,00,000 allowed in the year 2022-23 will be revoked and will be taxed as income by way of long – term capital gains for the financial year 2025-26.
Illustration
Mr. Vipul is a salaried employee. He had purchased a residential house in April, 2015 and sold the same on 25th April, 2022 for Rs. 28,40,000. Capital gain arising on sale of house amounted to Rs. 6,00,000. He could not purchase/construct another house by 31st July, 2023, however, in July, 2023 he deposited Rs. 6,00,000 in Capital Gains Account Scheme. In April, 2024 he withdrew Rs. 6,00,000 from the scheme and purchased a car from the said amount. Will he be entitled to claim any exemption under section 54? If yes, will the exemption granted be revoked subsequently?
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To claim exemption under section 54, the taxpayer should purchase a residential house within a period of one year before or two years after the date of transfer of old house or can construct a house within a period of three years from the date of transfer. In this case the old house was transferred on 25th April, 2022, hence, he has to purchase another house within a period of 2 years from 25th April, 2022. Alternatively, he can construct another house within a period of 3 years from 25th April, 2022.
The old house was transferred in the year 2022-23 and the due date of filing the return of income of the year 2022-23 is 31st July 2023. If Mr. Vipul cannot purchase/construct another house by 31st July 2023, then he has to deposit Rs. 6,00,000 in Capital Gains Account Scheme. By depositing Rs. 6,00,000 in the Capital Gains Account Scheme he can claim exemption of Rs. 6,00,000 under section 54. In this case he has deposited Rs. 6,00,000 in the Capital Gains Account Scheme and, hence, will be entitled to claim exemption only of Rs. 6,00,000. In other words, exemption under section 54 for the year 2022-23 will come to Rs. 6,00,000.
He has to utilise the funds deposited in the scheme to purchase/construct the house within the specified period of 2 years/3 years. The amount withdrawn from the scheme should be used to purchase/construct residential house. If the amount withdrawn from the scheme is used for any other purpose then it will be charged to tax as income by way of long-term capital gain of the year of withdrawal.
In this case Mr. Vipul has withdrawn Rs. 6,00,000 from the scheme. Thus, he should purchase/construct a residential house worth Rs. 6,00,000 in the year of withdrawal. However, he had utilised the said amount to purchase a car and, hence, Rs. 6,00,000 will be charged to tax as income by way of long-term capital gains of the year of withdrawal, i.e., financial year 2024-25.
[As amended by Finance Act, 2022]
What happens if we sell recently purchased or built property within three years and in accordance with the provision’s [net consideration- (cost of acquisition-capital gain exempted earlier)]? If my cost of acquisition is less than my capital gains and I claim the whole amount as an exemption earlier, am I now responsible for the full amount of the net consideration since my cost of acquisition is equal to the capital gains that were previously exempted?
Yes the whole net consideration will be taxable & the department may initiate penalty for the excess amount of cg claimed in previous year.
For more doubt you can mail me at [email protected]
Sold my house purchased in 2011 in loss and total amount used to purchase new house. Should I require to file ITR or show in ITR
I have Rs. 15 Lakh LTCG from the sale of a flat A, in 2022-23.I have also invested Rs. 50 Lakh from my savings in a new flat C in 2021-22. I had another flat B in my name at that time, which I sold off later in 2021-22 itself with LTCG of Rs. 12 Lakh and invested that in 54 EC bond, and shown it in ITR for 2021-22. However, flat C registration has been done in my wife’s name. She is a homemaker and without any income, although she has PAN.
TDS was duly deducted and paid/ return filed by me for flat C. Please tell me if I would be able to get an exemption of the LTCG benefit of Rs. 15 Lakh from the sale of flat A while filing ITR for 2022–23.
Yes you can claim exemption, you have mentioned years, you have to check exact date wise when you purchased flat c
Hi,
I sold an apartment in Oct 2021. Shall I buy a land to claim tax exemption under section 54?
You need to construct a residential house on that land, and you will get the exemption for the amt invested in land as well as building constructed
In section 54 there is a limit that you can avail exemption only once in a lifetime in respect of two residence houses but there is no such limit in respect of one residence house?
So does it mean that we can avail exemption in respect of Residence house n times in our lifetime?
Income tax mater LTCG – Sale of apartment – pending of NOC for closure of account
ACIT, reopening the case on the pretext that the house earnings escaped to declare in the income tax return for the assessment year of 2016-17
The assessing officer reopening the assessment of 2016-17 now and add back housing income to tax fully just because the builder’s joint construction agreement and not registered and only land agreement registerd.
income tax mater LTCG out sale of apartment.
When NOC applied for closure of LTCG in 2019 the ACIT, delayed the process and was going demanding documets after documets pretending that earlier documets mis placed etc..
Then suddenly ACIT, The assessing officer reopening the assessment of 2016-17 now and add back housing income to tax fully just because the builder’s joint construction agreement not registered and only land agreement registerd
Issued notices earlier in october 2019 and it was replied contesting to the notice, thru e- filing
When income is appeared in TDS, AND AS WELL IN form 26AS, the earnings of gross income under LTCG not at escaped to the assessee as well to the income tax department, and the same income also disclosed in return considering provision under sec 54 CG indexation cost tax returns filed inline with the department.
ACIT not accepting the declared return value of apartment for LTCG us.54 of ITax
. ACIT deny the benefit on the ground that construction agreement not registered hence the value to be taxed us.50
ACIT, The assessing officer reopening the assessment of 2016-17 now and add back housing income to tax fully just because the builder’s joint construction agreement not registered and only land agreement registerd.
I have purchased house in May 2021(paid part payment & done registration etc ) , Now want to sell existing two houses, One was purchase in Feb 20 & another house we have taken possession in April 21 (agreement date Feb 2010 & 90% payment was done in Feb 2014 ). My Question when I have to sale my both the property to avoid capital gain . & for calculation of Capital gain which date I have to consider for Possession taken in April 21
can the assessee use the capital gain to settle a loan against a residential property he had already purchased before one year of his sale?
I had sold a property in Dec 2019. I had put the said amount in a capital gain ac. I would get 24 months to buy a property I.e the time limit is 19th Dec 21. Govt should relax this time limit owing to corona, as sellers are not interested to show their flats. Thr
Is is necessary to attach any proof for claim u/s 54 when we sell and purchase within one year.
What would be the applicability of interest in event of no. Utlisation of the amount in CGAS Would interest be applicable from the sale of original asset ?
A property bought by me in 2007 was sold by me in Jan 2021 for a gain of 44lakhs. However i’ve already purchased another property in December 2019 for 80 lakhs. Agreemnet value is 80lakhs but i’ve paid only 10 lakhs as i have to pay in investments. I’m eligible for LTCG tax exemption but do i need to open a Capital Gain account in bank?..
Please help
I sold my old residental property which makes 66 lakh capital gain…..in long term……..can i invest 50 lakh in 54 ec bonds and remaining 16 lakh in new residental property to save tax?…
If I sell my residential property and do not purchase another property but wish to keep the amount in Govt Bonds can I get exemption from Capital gains tax.
How long do I have to invest..what is the rate of interest available. .and for how long do I gave keep amount blicked
Can i invest only the amount of capital gains in a new residential property after selling the old property or the entire sale proceeds have to be invested to get ltcg excemption.
Old property purchased for 1.18cr in feb 14, & sold for 2cr in feb 2021
New property purchased for 1.10cr.
Taxable Capital gain after indexation is 30lakhs.
Can i invest only 30 lakhs in property or i need to invest 2cr to avoid tax
Does residential house property under section 54 cover sale of land? I sold a residential plot(land) and deposited the capital gains in CG account in bank. And am buying a new plot (land only) with the same. Am I eligible for exemption u/s 54?
Purchase a new flat from builder by booking and subsequent payment is attract GST .Whether the new flat considered as purchase or construction under sec 54 ?
I had purchased plot no.1 in 2003.
Another Plot no. 2 was purchased in March 2020 for 50Lakhs from a housing loan of Rs.1 crore.
Now, plot 1 was sold in Nov 2020 with a LTCG of 1 Crore.
If the 1cr received from plot 1 sale is utilised for housing loan repayment (50Lakhs used for purchase of plot 2)
and balance 50 Lakhs is used for constructing a new house in plot 2, can I claim LTCG completely tax free.
I sold land for 32 lakhs. Deposited in IDBI capital gains account. I bought a land for 34 lakhs. Can I build a house of five portions in that land for my family using other sources of money ? Can I rent the houses later ?
Sir i have 4 residential house and 1 sop and other 3 let out . I have sold my SOP which was purchased in 2014 and want to purchase new house. Full sale consideration will be used to buy new house. Still i will be liable to pay LTCG ?
I have constructed 5 flats for my family on a single plot of land. Can I claim exemption us 54 by investing the capital gain arising on sale of those flats as single residential HP in another residential HP. In short is it valid to consider those 5 flats as a single residential HP.
There is a gated community property which is termed as Guest house/ Villa. Can I offset my property gain tax by buying Guest house/ Villa ??
Sir.
Can you elaborate on reinvestment in Residential house? Is there any limits ? Can the house be on a lrage area of land? Say a house on 3 acres of land on the city outskirts?
I have sold flat in 2017 and deposited balance capital gain amount in Capital Gain Account and got exemption from Capital Gains. Next two years I have neither purchased new house nor constructed new house. In third year, will the exemption be continued and can be availed if I invest in new ready to occupy house or invest in under construction property?
I have sold my bunglow for Rs. 2.00 Crs and furniture for Rs. 1.00 Crs in Dec 2019. Separate agreement was made for both. Purchase was in 2015 at 1.00 Crs for Bunglow and 10.00 Lacs for furniture.
I already have two more residential properties in my name
My queries are-
1) Can in invest in new residential property and save tax
2) Can i invest in some bonds and save tax
3) Can i can claim indexation benefit on furniture portion also
4) what are the ways to get maximum tax benefits
Thanks in advance
Had purchased a housing property in 2012-13, paying in installments an amount of Rs 41 lakh. All such payments were made by RTGS and the developer issued Money Receipts for these payments. The Agreement for Sale also shows the consideration as Rs 41 lakh. But in the Deed of Sale (which was registered), the developer had shown shown an amount less than that shown in the Agreement for Sale.
Now I am in the process of selling the flat. My question is, for the purpose of calculating the Long Term Capital Gain what should be the Actual Purchase Price of the flat,
That shown in the Agreement for Sale?, or
That shown in the registered Deed of Sale?
If the assessee is purchasing a new residential house property to claim exemption of LTCG of Rs.2.5 crore and the price paid of Rs.4 crore for new house property is more than the stamp duty value of Rs.2 crore, then the exemption can be claimed up to Rs.2 crore or for Rs.2.5 crore.
House sold on 20th march2019.Flat purchased on 8th March 2019.can I buy second house now after 31st March 2019,although this provision is in the budget for next Fy 2019-20.
I have a tax question regarding the capital gain tax of my site which I made a development agreement with builders
1) I have given my site to the builders and the ratio is 35% of flats belong to me and the builder owns 65% of what is built. There is no other financial agreement
2) The builder built the flats and handed over flats in 2016 May
3) I sold two flats one in April – May 2018 and other in October 2018.
4) with one flat sold money I purchased a flat in another location.
5)The second flat money is with me.
My question is do I need to pay any tax in the above transactions ? If So how can I calculate the tax. If I invest my second flat money to some place do I still need to pay the tax.
i am senior citizen who has already have house of my own
Please can you respond
I am staying in Flat A,I have bought Flat B under construction possession of whìch will be inDec2019.After getting the possession of the FlatB I Will Seĺl The existing Flat A. My qerry is how to get the benefit of LTCG on Flat A for the investments already made in Flat B?
I am staying in Flat A,I have bought Flat B under construction possession of whìch will be inDec2019.After getting the possession of the FlatB I Will Seĺl The existing Flat A. My qerry is how to get the benefit of LTCG on Flat A for the investment already made in Flat B?
Sir, I sold a residential joint share property at Rs. 1,30,00,000 in July 2018 and that property purchased at Rs.2,00,000 in 1999.
sale consideration =65,00,000(1.30 crore/2)
Less: indexed Cost of acquisition =2,80,000 (2,00,000/2)*280/100
Long term Capital gain =62,20,000.
I purchased another property in february 2018 at Rs. 47,00,000 in joint share. Now I want to demolish that property and want to construct on that land.
Now my question is Can I claim exemption u/s 54 related to purchased cost of 23,50,000(47,00,000/2) and cost of construction which will be incurred also?
Exemption under section 54 can be claimed in respect of capital gains arising on transfer of a capital asset, being long-term residential house property. I intend to sell a Residential plot for Rs 50 lakhs (which i bought in 2005 for Rs 3 lakh for construction of a House) and purchase a Flat for Rs 40 lakhs. Will the capital gains be eligible for exemption under Section 54 of IT Act. If not how to save capital Gains Tax
Can a house property be transferred
Through gift deed ,as it is without
Consideration, before three years from
The date of acquisition, after claiming
Benefits of section 54 ,being long term
Capital gains
Did you get the ans? can u share ans with me. I am in same situation
I have purchased 2 plots in year 2002 in a small town, same were sold in 2018 and recieved the amount by cheqe. The capital gain was invested in construction of house in year 2018 on plot purchased in a city in year 2010 by way of 40 % by cheque and 60 % by cash. Can I claim exemption under Sec 54 for the cash amount invested in construction of house.
COST OF ACQUITION OF HOUSE IN FY 2002-03 IS RS 300000
SALE CONSIDERATION IN APR 2019 IS RS 8500000
WHAT WOULD BE THE LONG TERM CAPITAL GAIN TAX
One of the conditions to be satisfied to claim the benefit u/s 54 is as follows.
Within a perod of onr yaer or two yeas——————-. in the case of comulsory acquisition the period of acquisitionor construction will be determined from the date of receipt of compensation (whether original or additional).
Where does it say that the” date of receipt compensation” will be the deciding date?
I own two house properties, one owned singly in my name and another in joint name with my spouse. Can i claim exemption under Sec 54 for sale of single owned house under these two conditions:
1) New house purchased in my name name.
2) New house is purchased in the name of my major son. Please reply.
i made sale of my house property and iam planning to invest the same in construction of a houseproperty but on a land that is co owned by me and my spouse.
can i gain 100% exemption on account of construction on co owned land???
please suggest me
My mother aged 70years + has a house since 9 years , in her single name , during this period I purchased a house in mumbai on a home loan which is now 8 year old. Now I have left my job so unable to pay the loan so we plan to sell my mothers house. So can we repay the home loan with this amount and put the remaining amount in the bonds. Both the houses are in differrent cities. Will I get a tax benifit
Question – In case I sell for around Rs 175.00 lac, the only one housing Flat owned by mein Delhi in my single name over past around 30 years and after deducting therefrom Rs 15-00 lac towards its indexed cost of Rs 15-00 lac, there would be LTCG of
Rs160-00 lac. So ,if I pay tax on LTCG sum of
Rs 60-00 lac and invest balance LTCG Rs 100.00 lac in purchase of a new Flat in my single name, then I understand that thus I would be entitled under Section :54 for Exemption from payment of LTCG on the sum of Rs 100-00 lac so invested in purchase of new Flat in my own name.
However, kindly confirm to me whether I would still remain entitled for such an exemption from LTCG on said sum of Rs 100.00 lac if in case I were to decode to so buy a new Flat in my name Jointly with the name of my daughter or whether in that case I would lose the benefit of LTCG tax ?
If I construct one floor above existing property from the capital gain, will it be exempted?
Dividend received from bank it is taxable or not?
I SOLD INDUSTRIAL PLOT. CAN I SAVE LONG TERM CAPITAL GAIN BY INVESTING IN NEW INDUSTRIAL PLOT OR COMMERCIAL OFFICE FOR IT INDUSTRY USE . IS THEIR ANY OTHER OPTION OTHER THAN NEW HOUSE OR CAPITAL GAIN BOND FOR MAX 50 LACKS. PL. REPLY
respected friends, if i have three houses and among it i have sold one house and within three months i purchased another one house …so can i get deduction u/s 54 on purchased of new house even if i had alredy existing two houses…m waiting
As long as the father builds a HP for residential purpose in India it is fine.
Hi! please let me know if a father sells his residential house and wishes to build new house at his sons site what will be the implication
What will happen if I already own a residential house and a new residential house is bounght? Will I qualify to get the deduction/ xemption?