Treatment of capital gain on sale of commercial property

The capital gain will be taxed as Long term capital Gain provided it was held for more than 36 months. You may claim exemption under 54EC by depositing the capital gain in Specified Asset, ie Bonds of NHAI , REC

Yes you can buy a residential property from the CG part and if balance left can invest in CG bonds 

Dear All,

Exemption u/s 54F is not available, You can Claim 54 & 54EC deduction 

Reasons:

Section 54 specifically allow exemption of capital gain on Transfer of Long Term Asset being House Property in the nature of Residential House whether self occupied or let out.

Further Section 54F specifically allow exemption of capital gain on transfer of Long Term Capital Asset other than Residential House.

The difference can be highlighted as

A RESIDENTIAL HOUSE, can be of both Residential Nature and Commercial Nature. Mere change in classification of Residential House from Residential Nature to Commercial Nature does not entitle the assessee to claim deduction under 54F.

Both Section 54 and 54F recognise Residential House, irrespective of their nature of use.

Extract of both 54 and 54F are reproduced below

BARE ACT SECTION 54F:

(1) Subject to the provisions of sub-section (4), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not being a residential house (hereafter in this section referred to as the original asset), and the assessee has, within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, a residential house (hereafter in this section referred to as the new asset), the capital gain shall be dealt with in accordance with the following provisions of this section, that is to say,—

(a) if the cost of the new asset is not less than the net consideration in respect of the original asset, the whole of such capital gain shall not be charged under section 45 ;

(b) if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45:

Provided that nothing contained in this sub-section shall apply where—

(a) the assessee,—

(i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or

(ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or

(iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and

(b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head “Income from house property”. 

BARE ACT SECTION 54 : [Subject to the provisions of sub-section (2), where, in the case of an assessee27 being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset 28[***], being buildings or 29lands appurtenant thereto, and being a residential house29, the income of which is chargeable under the head “Income from house property” (hereafter in this section referred to as the original asset), and the assessee has within a period of 30[one year before or two years after the date on which the transfer took place purchased31], or has within a period of three years after that date 31a[constructed, a residential house], then], instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,—

Dear All,

One of my client has sold a property which is residential at the time of purchase but later on converted into commertial category by the government and it is falling unde long term capital gain at the time of selling the property.Now client wanted to invest in sec 54EC in which he wanted to invest the capital gain amount so now the question is what will be the treatment of rest of the amount which is left.For example

Client sold 1 cr of property in which 25 lakh is capital gain so he invested 25 in capital gain bonds as per Sec 54 EC and the rest of 75 lakhs can he invest in any insrument like mutual fund or FD or anything he want?????

Request you to revert urgently.

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