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Capital Gain not to be charged on Investment in Units of a Specified Fund [Section 54EE]

  1. The assessee has transferred a long-term capital asset.

  2. He has invested the whole (or any part) of capital gains in long-term specified assets (to be notified by the Central Government to finance start-ups). Such investment can be made at any time within 6 months from the date of transfer of original asset. The amount of such investment (made on or after April 1, 2016) by an assessee during any financial year cannot exceed Rs. 50 lakh. Moreover, investment made by an assessee in long-term specified assets, out of capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year should not exceed Rs. 50 lakh.

  3. Amount of Exemption or Deduction -

    1. If the amount of capital gain is equal to or less than the cost of the long-term specified assets acquired within 6 months of the date of transfer, the entire capital gain shall be exempt.

    2. If the amount of capital gain is greater than the cost of the long-term specified assets, than the cost of the long-term specified assets shall be allowed as exemption.

      In other words, capital gain shall be exempt to the extent it is invested in the long-term specified assets within a period of 6 months from the date of such transfer.

  4. Revocation of exemption -

  5. The long-term specified assets should not be transferred (not even loan or advance is taken on security of such assets) within 3 years from the date of acquisition. If long-term specified assets are transferred (or loan or advance is taken on security of such assets) within 3 years, the amount of exemption given earlier will be revoked and it shall be chargeable to tax as long-term capital gain in the year in which such specified assets are transferred (or loan or advance is taken).

  6. Consequences if the long-term specified asset is transferred within 3 years [Section 54EE(2)]:

    Where the long term specified asset is transferred by the assessee at any time within a period of three 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.

    1. 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 on the date on which such loan or advance is taken. [Explanation 1 to section 54EE

    2. For the purposes of this section,—

      1. “cost”, in relation to any long-term specified asset, means the amount invested in such specified asset out of capital gains received or accruing as a result of the transfer of the original asset;

      2. “long-term specified asset” means a unit or units, issued before 1.4.2019, of such fund as may be notified by the Central Government in this behalf.

 

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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