capital gain exemption

1. Capital gain
Exemption
Prepared by: Bhupinder Kaur
DEPARTMENT OF COMMERCE
S.D.COLLEGE, AMBALA CANTT

2. SECTION 54 EXEMPTION FOR CAPITAL GAINS ARISING ON
TRANSFER OF RESIDENTIAL HOUSE PROPERTY
• Assesse : individual or HUF
• The asset transferred should be a long-term capital asset, being a
residential house property.

3. CONDITION
• Within a period of one year before or two years after
the date of transfer of old house, the taxpayer should
acquire another residential house or should construct
a residential house within a period of three years
from the date of transfer of the old house. In case of
compulsory acquisition the period of acquisition or
construction will be determined from the date of
receipt of compensation (whether original or
additional).

4. CONDITIONS
• Exemption can be claimed only in respect of one
residential house property purchased/constructed in
India. If more than one house is purchased or
constructed, then exemption under section 54 will be
available in respect of one house only. No exemption
can be claimed in respect of house purchased outside
India.

5. Capital Gains Account scheme
If the asset is sold in the PY, and the seller intends to,
but is yet to purchase the new house property as the
time limit of 2 years or 3 years has not yet expired,
then the assesse is required to deposit the amount of
gains in the Capital gains account scheme (in any
branch of public sector, bank) before the due date for
filing income tax returns.

6. Additional Conditions
•1. If new asset is sold within 3 years, amount
earlier exempted under this section will be
reduced from its COA to calculate capital gains
thereon
•2. If the amount in CGAS is not utilized within
the prescribed time limit, such unutilized
amount will be taxable as capital gains.

7. Section 54B Exemption on Capital Gains from Transfer of Agricultural
Land
• available only to an individual or a HUF

8. CONTD.
• The land may be a long-term capital asset or short-term capital asset
• Within a period of two years from the date of transfer of old land the
taxpayer should acquire another agricultural land.
• In case of compulsory acquisition the period of acquisition of new
agricultural land will be determined from the date of receipt of
compensation. However, as per section 10(37), no capital gain would
be chargeable to tax in case of an individual or HUF if agricultural
land is compulsorily acquired under any law and the consideration of
which is approved by the Central Government or RBI and received on
or after 01-04-2004.

9. Exemption Amount
• Long-Term Capital Gain OR Cost of new asset (land)whichever lesser.
• CGAS* available: Yes – deposit by return filing due date.
• Additional Conditions: 1. If new asset is sold within 3 years, amount
earlier exempted under this section will be reduced from its COA to
calculate capital gains thereon
• 2. If the amount in CGAS is not utilized within the prescribed time
limit, such unutilized amount will be taxable as capital gains

10. Compulsory acquisition of land and building
used in an industrial undertaking 54D

11. CONTD.
• Assessee- Any assessee
• Type of asset -transferredLand or building forming part of an industrial
undertaking used for the same in the past 2 years prior to transfer
• Type of transfer-LTCG
• New asset purchased-Land or building for shifting or re-establishing the
industrial undertaking
• Time Limit for investment in new asset Within 3 years from the date of
transfer
• Exemption Amount-Long Term Capital Gain OR Cost of new asset
(land/building)whichever lesser
• CGAS* available Yes – deposit by return filing due date

12. 54E, 54EA, 54EB: Investment in specified securities

13. • Assessee-Any assessee
• Type of asset transferred-Long-term capital asset
• Type of transfer-LTCG
• New asset purchased-Specified securities – includes government
securities, savings certificates, units of UTI, specified debentures, etc.
• Time Limit for investment in new asset-Within 6 months from the
date of transfer
• Exemption Amount-Cost of new asset x Capital Gain / Net
consideration (maximum up to the capital gain)
• CGAS* available-No

14. Exemption under section 54 F

15. • Assessee is an Individual or HUF.
• Capital Gain arises from the Sale of any capital asset other than
Residential House.
• Net consideration has been re-invested in purchase of one residential
house within a period of 1 year before the date of transfer or within
a period of 2 years after the date of transfer; or
• Net consideration has been re-invested in construction of one
residential house in India within a period of 3 years from the date of
transfer.

16. Meaning Of ‘Net Consideration’
• Net consideration of transfer of capital assets means full value of
consideration received on account of transfer of the capital assets as
reduced by any expenditure incurred wholly and exclusively in
connection with such transfer.
• Net consideration = Full value of consideration (-) expenditure
• In case entire sale receipts are not invested, the exemption is allowed
proportionately.
• [Exemption = Cost the new house x Capital Gains/Sale Receipts

17. Section 54EC

18. • It is available to all assesses
• Where the capital gain arises from transfer of long-term
capital asset being land or building or both, and the assessee
has, at any time within a period of six months after the date
of such transfer invested the whole or any part of capital
gains, in the ‘long-term specified assets’.
• “Long-term specified asset” for making any investment u/s
54EC means any bond redeemable after five years and
issued by National Highways Authority of India (NHAI) or by
Rural Electrification Corporation Limited or any other bond
notified by central government.

19. • Provided that the investment made in the long-term
specified asset by an assessee during any financial year does
not exceed Rs 50 Lakh.
• Provided further that the investment made by an assessee
during the financial year in which the asset or assets are
transferred and in the subsequent financial year does not
exceed Rs 50 Lakh.

20. •Sale Price of Asset = 2,00,00,000
•Less: Indexed Cost of Acquisition
•(5,00,000 X 280/100) = 14,00,000
•Long-term Capital Gains = 1,86,00,000
•Less: Deduction u/s 54EC = 50,00,000
•Net Long term Capital Gains 1,36,00,000