Several changes were made by the Finance Act, 1992 in the scheme of exemption and taxation of capital gains. However, there is no change in the scheme of the IT Act relating to the exemption in respect of long-term capital gain in house property. This incentive by way of complete income tax exemption in respect of capital gain is contained in Section 54. Thus, if an investor transfers his residential house or a part thereof and makes a long-term capital gain, (relating to a house property which was acquired over three years ago) and if the entire long-term capital gain is invested in the purchase of a residential house property within one year in anticipation of the transfer or within two years of the transfer or if the house property is constructed within three years of the transfer and the entire long-term capital gain is invested in the acquisition of such residential house property, the entire long-term capital gain in respect of the transfer of the first residential house property would be fully exempt from income tax. Where, however, the entire long- term capital gain is not so utilised or a part thereof is so invested, then only the proportional amount of long-term capital gain would be so exempt. |