How to get Exemption In Case Of Transfer Of Capital Asset

Particulars SEC-54 SEC-54B SEC-54D
Assessee Ind/ HUF Ind/ HUF Any Assessee
Nature of asset transfer Long term capital asset Long/Short term capital asset Long/Short term capital asset
Asset transferred Residential house property Urban Agricultural land Land and building of an industrial undertaking
Usage of asset transfer - 2 years before the date of transfer for agricultural purpose 2 years before the date of transfer for industrial Purpose
Mode of transfer - - By way of compulsory acquisition
Asset purchased/ constructed 1Residential house property Agricultural land (Urban/Rural) Land and building of an industrial undertaking
Due date of Investment (Time limit) Within 1 year before the date of transfer(or) Within 2 years after the date of transfer.Construction: -within 3 years after the date of transfer Purchase: - Within 2 years after the date of transfer Purchase: -Within 3 years after the Date of transfer
Capital gain account scheme Available Available Available
Amount to be invested Gross capital gain Gross capital gain Gross capital gain
Exemption(Whichever Is lower) Gross capital gain(or)Investment(or)10 crores Gross capital gain(or)Investment Gross capital gain(or)Investment
Holding period of new asset 3 years 3 years 3 years
Consequence on transfer of asset within3 years/5Years Earlier exemption shall be deducted from cost of acquisition of such asset transferred Earlier exemption shall be deducted from cost of acquisition of such asset transferred Earlier exemption shall be deducted from cost of acquisition of such asset transferred
Unutilized amount of capitalgain deposit Account The unutilized amount will be taxable after the expiry of time. The unutilized amount will be taxable after the expiry of time. The unutilized amount will be taxable after the expiry of time.
Particulars SEC-10(37) SEC-54EC SEC-54F
Assessee Individual/HUF Any assessee Ind/ HUF
Nature of asset transfer STCA/LTCA LTCA LTCA
Asset transferred Agricultural land (situated in urban area) Land(or)building (or) both Any capital asset other than residential house property
Usage of asset transfer At least for 2 years - -
Mode of transfer By way of compulsory acquisition - -
Asset purchased/ constructed - NHAI bonds RECL bonds & any specified assets 1Residential house property
Due date of Investment (Time limit) - Purchase: - Within 6 months after the date of transfer Within 1 year before the date of transfer(or) Within 2 years after the date of transfer.Construction: -within 3 years after the date of transfer
Capital gain account scheme - Not Available Available
Amount to be invested - Gross capital gain Net consideration
Exemption(Whichever Is lower) - Gross capital gain(or)Investment(or)50 Lakhs Net consideration(or)Investment*Gross C.G/Net consideration(or)10 crores
Holding period of new asset - 5 years 3 years
Consequence on transfer of asset within 3 years/5Years - LTCA which is exempted earlier, will be liable to pay now. LTCA which is exempted earlier, will be liable to pay now.
Unutilized amount of capital gain deposit Account - Not applicable The unutilized amount will be taxable after the expiry of time.
Example of Sec-54EC:

Mr. Supreeth purchase house property on 28-12-2003 for Rs.5,00, 000.He sells the house on 01-11-2019 for Rs. 2,00,00,000. He purchased bonds of NHAI which are redeemable after 5Years as under:

  • On 15-03-2023 – Rs.50,00,000
  • On 15-04-2023 – Rs.50,00,000

In the above example, the capital gain for A.Y 2023-24 shall be as under,

Net Sale consideration 2,00,00,000
Less: - Indexed cost of acquisition 15,18,349
(5,00,000*331/109) -
Gross long term capital gain 1,84,81,651
Less: - exemption u/s-54EC 50,00,000
Net long term capital gain 1,34,81,651

As shown in the example, assessee has tried to take double benefit of Sec-54EC by investing amount in two different F.Y but within 6 months after the date of transfer.But this planning is nullified by the proviso mentioned in Sec-54EC.

Example of Sec-54F:

Mr Akhil has sold a residential house property and the capital gains is Rs 25,00,000/- on June 9th 2020.

In 17thOctober 2020, Mr Akhil purchased a new residential house property of Rs 40,00,000/-

In January 2021, Mr Akhil sold the new residential house Property for Rs 55,00,000/-

Based on the capital gains mentioned above, let's compute the taxable capital gains for Mr Akhil for the FY_20-21
(Property sold in June 2020)

FY_20-21

Gross Long term capital gain 25,00,000
Less: - exemption u/s-54F 40,00,000
Net Long term capital gain -

FY_21-22

Sale consideration 55,00,000
Less: - Cost of Acquisition (Note) 15,00,000
Long term capital gain 40,00,000

Note: -

Cost of Acquisition 40,00,000
Less: - Capital gains claimed for earlier house property 25,00,000
Cost of new house (to be considered) 15,00,000
Points to remember
  • Only one house property can be purchased or constructed, the value should be less than 2crore. The exemption for 2 properties for capital gains up to Rs.2 crore is only once in a lifetime benefit under Sec-54. No such exemption in sec-54F.
  • From 1st April 2023, the capital gains tax exemption under Sec-54 & sec-54F will be restricted to Rs. 10 crores. Earlier there was no threshold.
  • You should not own more than one residential house at the time of sale of the original asset
  • An assessee cannot claim deduction of more than Rs 50,00,000 of investment made during the financial year including investment made in subsequent financial year.

Disclaimer:

“Information contained herein is for informational purposes only and should not be used in deciding any particular case. The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Though utmost efforts have been made to provide authentic information, it is suggested that to have better understanding and obtaining professional advice after thorough examination of particular situation.”

Prepared by, A.SAI SUPREETH ROYAL
(Article assistant)

Prepared On:
27/04/23



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