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"Exemption Of Long-Term Capital Gains Regarding Any Capital Asset On Investment In A Residential House "

Another income tax exemption which can be enjoyed by an investor on investment in residential house property can be secured under Section 54F.

 

Thus, where an investor has a long-term capital gain on the transfer of any capital asset (other than a residential house) like shares, a plot of land, commercial assets, commercial house property, jewdllery, etc., then he can secure complete income tax exemption on the long-term capital gain in respect of the sale of the capital asset if the entire net sale proceeds thereof are invested in the acquisition of a residential house or a part either by purchase or construction.

Thus, the entire net sale proceeds should be invested within 1 Year of the transfer in advance or within 2 years from the date of transfer in the purchase of a residential house property or the sale proceeds may be invested within 3 years in the construction of a residential house property.

 

However, there is one more condition, which is very important and which must be ensured by every taxpayer. This benefit of exemption is available only where the taxpayer does not own any residential house as on the date of the transfer of the capital asset.

 

The Finance Act, 2000 had, from AY 2001-2002, removed one condition for the operation of the exemption under Section 54F. Thus, if an assessee owns not more than one residential house, on the date of transfer of the original asset, he would be eligible to the exemption under Section 54F.

 

Further, such a person should not buy within 1 year any other residential house or a flat or should not construct within 3 years any residential house from the date of transfer of the original capital asset.

 

Further, the lock-in period for the new residential house so acquired is 3 years. Thus, the newly acquired house should not be so sold or transferred within a period of 3 years, otherwise the entire capital gain becomes taxable.

 

Where the entire sale proceeds of any capital asset are not so invested in the residential house property on or before the last date of voluntary filing of the income tax return, then the same procedural requirement about the investment of the money in a bank account in a Capital Gain A/c Scheme, as explained earlier, for the purposes of Section 54 is equally applicable for Section 54F.
 

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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