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Exemptions Under Capital Gains

Exemption available in Computation of Capital Gain

See.

Assessee to
whom allowed

Conditions go be satisfied

Quantum of exemption

54

Individual/HUF

1. Transfer should be of a residential house income of which is chargeable under the head ‘Income from house property’.

2. Ii must be a long-term capital asset.

3. Purchase of another residential house should be within one year before or 2 years after, or construction should be within 3 years after the date of transfer.

Note.—The assessee can purchase or construct only one residential house and that house must be in India

Actual amount
invested in new asset or the capital gain whichever is less.

54B

Individual/HUF

1. Transfer (excluding compulsory acquisition) should be of agricultural land.

2. Ii must have been used in the 2 years immediately preceding the date of transfer for agricultural purposes either by the assessee or his parent.

3. Another agricultural land should be purchased within 2 years after the date of transfer.

Actual amount
invested in new asset or the capital gain whichever as less.

Exemptions Under Capital Gains

54D

Any assessee which is an industrial
undertaking

1. There must be compulsory acquisition.

2. The property compulsorily acquired should be land and building forming part of an industrial undertaking,

3. The asset must have been used in the 2 years immediately preceding the date of transfer of the assessee for the purpose of the business of the undertaking.

4. Within a period of 3 years after the date of compulsory acquisition any other land or building should be purchased or constructed for the use of existing or newly set up industrial_undertaking.

Actual amount
invested in new asset or the capital gain whichever is less.

S4EC

Any assessee

1. The asset transferred should be a long-term capital asset
W.e.f. A.Y. 2019-20, The asset transferred should be a long-term capital asset being land or building or both

2. Within a period of 6 months after the date of transfer, the capital gain must he invested in the specified assets i.e. bonds redeemable after 3 years (5 years w.e.f. 1.4.2018) issued by NI-IA! & RECL or any other bond notified by the Central Government in this behalf.

The investment during the financial year in which original asset or assets are transferred
and in the subsequent financial year should not exceed 50 lakhs.

54EE

Any assessee

1. The asset transferred should be a long-term capital asset

2. Within a period of 6 months after the date of transfer, the capital gain must he invested in long-term specified asset i.e. unit or units issued before 1.4.2019 of such fund as may be notified by the Central Government in this behalf.

The investment during the financial year in which original asset or assets are transferred
and in the subsequent
financial year should not exceed Rs. 50 lakhs.

54F

Individual/HUF

1. The asset transferred should be a long-term capital asset, not being a residential house.

2. Within a period of 1 year before or 2 years after the date of transfer, a residential house should be purchased or constructed within a period of 3 years after the date of transfer.

Note.—The assessee can purchase or construct only one residential house and that house_must_be_in_India.

3. The assessee should not own more than one residential house on the date of transfer.

4. The assessee should not within a period of 2 years purchase or should not within a period of 3 years construct any residential house other than the new asset.

If the cost of the new residential house is not less than the net consideration then the whole of the capital gain. Otherwise, LTCG
Amt. invested
Net considcration pncc

54G

Any assessee being an
industrial
undertaking

1. Machinery, plant, building. or land used for the business of an industrial undertaking situated in an urban area should have been transferred.

2. Transfer should be due to shifting to any area other than an urban area.

3. Within a period of 1 year before or 3 years after the date of transfer purchased machinery, plant or acquired building or land or constructed building and completed shifting to the new area.

If the cost of the new assets and expenses incurred for shifting are greater than the capital gain, the whole of such capital gain. other-wise capital gain to the extent of the cost of the new asset.

54GA

Any assessee being an
industrial
undertaking

1. Machinery, plant, building, or land used for the business of an industrial undertaking situated in an urban area should have been transferred.

2. Transfer should be due to shifting to any Special Economic Zone whether developed in any urban area or any other area.

3. Within a period of 1 year before or 3 years after the date of transfer purchased machinery, plant or acquired building or land or constructed building and completed shifting to the new area.

If the cost of the new assets and expenses incurred for shifting are greater than the capital gain, the whole of such capital gain. Otherwise capital gain to the extent of the cost of the new asset.

54GB

Individual/HUF

Capital gain arising on the transfer of a long-term residential property (house or plot) shall be eligible for exemption if the amount of net consideration is invested in the equity shares of SME or eligible start-up company before the due date of furnishing the return of income under section 139(1) and the company utilizes such amount for acquiring new plant and machinery within one year from the date of subscription of shares.

If the amount of
investment in the new asset is not less than the net consideration then the rhole of the capital gain. Otherwise,

LTCG x [ Cost of New Asset / Net Consideration Price ]

 

Capital Gain Scheme.—

If the new asset is not acquired under sections 54, 54B, 54D, 54F, 54G and 54GA or the full amount could not be invested upto the due date of furnishing the return of income, the assessee can deposit the desired amount under the Capital Gain Scheme on or before the due date of return and thus can acquire the asset within the stipulated time out of money withdrawn from such scheme at a later date. In the case of section 54EC, the Capital Gain Scheme is not applicable.

Consequences if the new asset acquired is transferred within 3 years of its acquisition

Under sections 54, 54B, 54D, 54G and 54GA.—

For computation of new Capital Gain (which can be short-term or long-term), the cost of acquisition of such new asset shall be reduced by the amount of Capital Gain exempt under sections 54, 54B, 54D, 54G and 54GA earlier. Note.—If the land or building or both is transferred after 2 years but within 3 years of its acquisition, it will be a long-term capital gain.

Under section 54F.—

Besides the new Capital Gain (which will be short-term), the Capital Gain exempt earlier under section 54F, shall be long-term capital gain of the previous year in which new asset is transferred. Note.—If the residential house property is transferred after 2 years but within 3 years of its acquisition, it will be a long-term capital gain.

Under section 54EC.—

Where the long-term specified asset is transferred or converted (otherwise than by transfer) into money at any time within a period of 3 years from the date of its acquisition, the amount of capital gain exempt under section 54EC earlier, shall be deemed to be long-term capital gain of the previous year, in which the long term specified asset is transferred or converted (otherwise than the transfer) into money.

If the assessee takes any loan or advance on the security of such long-term specified asset, he shall be deemed to have converted (otherwise than by transfer) such long-term specified asset into money on the date on which such loan or advance is taken.

Under section 54EE.—

Where the long-term specified asset (unit) is transferred by the assessee at any time within a period of 3 years from the date of its acquisition, the amount of capital gain exempt under section 54EE earlier, shall be deemed to be long-term capital gain of the previous year, in which the long term specified asset is transferred.

If the assessee takes any loan or advance on the security of such long-term specified asset, he shall be deemed to have transferred such long-term specified asset into money on the date on which such loan or advance is taken.

Consequences if the amount deposited in Capital Gain Scheme is not utilised within the stipulated time of 3 years (2 years in case of section 54B).—

The unutilised amount shall be Capital Gain (short-term or long-term depending upon original transfer) of the previous year in which such period has expired. However, in case of section 54F, proportionate amount shall be taxable.

Related Topics....Under the head 'Capital Gain'

Capital Assets, Capital Gain & Transfer of Capital Assets for Taxation of 'Capital Gain'
Types of Capital Assets for Computing ‘Capital Gain’
Computation Of ‘Period Of Holding of an Asset' for Computing Gapital Gain [Explanation 1(i) to Section 2(42A)]
Transfer Of A Capital Asset [Section 2(47)] for Computing Capital Gain
Transactions Not regarded as ‘Transfer’ for Computing Capital Gain [Section 46 and 47]
Method of Computing Capital Gain [Section 48]
Deemed Cost of Acquisition of Asset for Computing Capital Gain
[Section 55(2)] : Cost of Acquisiton of Assets for Computation of Capital Gain
Capital Gains Accounts Scheme, 1988.
Types of Capital Gain
Tax on Long-Term Capital Gain in certain Cases (Section 112A)
Exemption of Capital Gains under Section 10 and 115JG

Exemption of Capital Gains under Sections 54, 54B, 54D, 54EC, 54EE, 54F, 54G, 54GB anf 54H

(Section 54) : Exemption of Capital Gains from the Transfer of Residential House Property
(Section 54B) : Exemption of Capital Gain on Transfer of Land used for Agricultural Purposes
(Section 54D) : Exemption of Capital Gains on Compulsory Acquisition Of Land And Buildings forming part of Industrial Undertaking
(Section-54EC) : Exemption of Capital Gain on Transfer of any Long Term Capital Asset on the basis of Investment in certain Bonds
(Section 54EE) : Capital Gain not to be charged on Investment in Units of a Specified Fund
[Section 54F] : Exemption of Capital Gain on Transfer Of Long-Term Capital Assets other than a House Property
[Section 54G] : Capital Gain on Shifting of Industrial Undertaking from Urban Areas to Non-Urban Areas :
[Section 54GA] : Exemption of Capital Gain on transfer of assets in case of shifting of Industrial Undertaking from an urban area to any Special Economic Zone (SEZ)
(Section 54GB) : Exemption of Long term Capital Gain Tax on Transfer of Residential Property if Net Consideration is Invested in the Equity Shares of a new Start-up SME Company :
(Section 54H) : Extension of time limit for acquiring new Asset or Depositing or Investing amount of Capital Gain, in case of Compulsory Acquisition :

Capital Gain in various Special Cases - How to Find Out or Calculate

  1. Capital Gain from Zero Coupon Bonds

  2. Capital Gain in case of amount Received from an Insurer on account of Damage or Destruction of any Capital Asset [Section 45(1A)]:

  3. Capital Gain in the case of Transfer of Depreciable Assets [Section 50] -

  4. Capital Gain on Conversion of Capital Asset into Stock-in-Trade [Section 45(2)]-

  5. Capital Gain on Transfer of Capital Asset by a Partner/Memeber to a Firm/AOP/BOI as Capital contribution [Section 45(3)]-

  6. Capital Gain on Distribution of Capital Assets by a Firm, AOP/BOI to Partners at the time of Dissolution [Section 45(4)]-

  7. Capital Gain on Compulsory Acquisition of a Capital Asset [Section 45(5)]-

  8. Computation of Capital Gains in case of Joint Development Agreement [Section 45(5A)] [W.e.f. A.Y. 2018-19]

  9. Capital Gain on Conversion of Debentures / Bonds into Shares [Section 47(x), 49(2A) and rule 8AA] :

  10. Capital Gain on Transfer of Shares / Debentures in the hands of Non-Residents (Proviso 1 to Section 48 and Rule 115A) :

  11. Capital Gain on Transfer of Self-Generated Capital Assets :

  12. Capital Gain on Transfer of Bonus Shares -

  13. Capital Gain on Transfer of Right Entitlement -

  14. Capital Gain on Transfer of Securities in Demat Form -

  15. Capital Gains on Distribution of Assets by Companies in Liquidation [Section 46]:

  16. Computation of Capital Gains in the case of Transfer of Land and Building or in Real Estate Transactions [Section 50C] -

  17. Capital Gains on Purchase by Company of its Own Shares or Other Specified Securities [Section 46A]:

  18. Capital Gain on Sale of Land and Building to be computed separately in case of Building Constructed by the Assessee:




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