SECTION – 54F CAPITAL GAINS ON THE TRANSFER OF CAPITAL ASSET
What is the nature of Capital Asset?
- If the capital gain arises from any long-term capital asset, not being a residential house, exemption can be claimed under this section.
Who can claim exemption under this section?
- Any individual or HUF is eligible to claim exemption under this section
What is the amount of exemption that can be claimed under this section?
|Scenarios||Amount of Exemption||Cost of New Asset if sold within Lock-in Period*|
|Amount Reinvested> Net Consideration of asset transferred
|Full amount shall be exempt||Capital gains exempted earlier will be taxable in the year new asset is sold.|
|Amount Reinvested< Net Consideration of asset transferred
|Capital gains * Cost of new asset/Net consideration||Capital gains exempted earlier will be taxable in the year new asset is sold.|
*Lock-in period for New Property Purchased or Constructed: The said property cannot be transferred for a period of 3 years after acquisition or construction.
What are conditions to be fulfilled for claiming exemption?
- Assessee should not hold more than one house property on the date of transfer (excluding new house).
- Assessee should purchase the new house one year before or two year after the date of such transfer or construct a house within a period of 3 year from the date of such transfer.
- Assessee is not allowed to purchase for next 2 years or construct for next 3 years any other house property. If the assessee does any of these, the capital gains earlier exempted will be fully taxable in the year of such purchase or construction.
- The new asset should not transfer for the next 3 years from the date of such transaction.
What if the capital gain amount is not used in the year of sale before filing return?
- Such amount should be deposited with the CGAS account.
What if the deposited amount is not utilized within the period given time period?
- If the deposited amount is not utilized within the period of 3 years from the date of original transfer, such amount will be taxable as capital gain in the PY in which the 3 years’ time period expires.
Disclaimer: The above-mentioned cases are illustrative and not exhaustive. This article is only for discussing general issues and hereby we do not express any opinion or give any consultation in what so ever manner understood. The cases may differ from assessee to assessee. We recommend you to take expert advice depending upon your particular case.