EXEMPTION FROM CAPITAL GAIN:
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A.
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Section 54: Long Term Capital Gain arising from transfer of Residential House.
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1.Who can claim benefit of this section?
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Individual or H.U.F.
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2.Which asset the tax payer should acquire to get the benefit this section?
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Residential House Property in India or Outside India.
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3.What is the time limit for acquiring the new asset?
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Purchase: 1 Year before transfer or within year from the date of transfer.
Construction: Within 3 years from the date of transfer construction should be completed.
(Either of the two conditions should be satisfied But if both the conditions are satisfied then also there is no problem.)
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4.From which date the time limit shall be computed?
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From the date of Transfer but in case of compulsory acquisition from the date of receipt of compensation whether initial or full.*
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5.Amount of Exemption?
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Investments in the new asset (Including the amount deposited in the deposit scheme) or capital gain whichever is lower.
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6.Possibility of revocation of exemption in the subsequent year?
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If such new asset is transferred within 3 years from the date of acquisition.
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7.In case of transfer of such new asset within 3 years how computation of capital gain is to be made for such new asset & such gain is Long term or short term capital gain?
(It is taxable in the Previous Year in which such transfer takes place).
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Sales Consideration of New Asset: XXXX
Less: (Cost of Acquisition of new asset
Capital Gain claim exempted earlier
undersection 54 ) XXXX
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Short term Capital Gain XXXX
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8.Whether Benefit of scheme is available?
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Yes
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9. Notes: a) Such exemption is not limited to purchase or construction of one residential house property only. Assessee
may purchase two houses by selling one or can purchase one house by selling two houses.
b) Cost of new house includes cost of land.
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B.
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Section 54B: Long Term/Short Term Capital Gain arising from transfer of Urban Land used for Agricultural Purpose.
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1. Who can claim benefit of this section?
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Individual. Provided such land should be used for agricultural purpose by the assessee or by his parents at least for a period of two years immediately before the date of transfer.
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2. Which asset the tax payer should acquire to get the benefit this section?
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Agricultural Land may be situated at urban area or rural area.
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3. What is the time limit for acquiring the new asset?
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Such Asset should be acquired within 2 years from the date of transfer and in case of compulsory acquisition from the date of receipt of compensation initial or full.
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4. From which date the time limit shall be computed?
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From the date of Transfer but in case of compulsory acquisition from the date of receipt of compensation whether initial or full. *
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5. Amount of Exemption?
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Investments in the new asset (Including the amount deposited in the deposit scheme) or capital gain whichever is lower.
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6. Possibility of revocation of exemption in the subsequent year?
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If such new asset is transferred within 3 years from the date of acquisition.
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7. In case of transfer of such new asset within 3 years how computation of
capital gain is to be made for such new asset & such gain is Long term or
short term capital gain?
(It is taxable in the Previous Year in which such transfer takes place).
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Sales Consideration of New Asset: XXXX
Less: (Cost of Acquisition of new asset
Capital Gain claim exempted earlier
undersection 54 B) XXXX
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Short term Capital Gain XXXX
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8. Whether Benefit of scheme is available?
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Yes
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C.
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Section 54D: Long Term/Short Term Capital Gain on compulsory acquisition of land or buildings forming part of Industrial Undertaking.
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1. Who can claim benefit of this section?
(Meaning of Industrial Undertaking: It not only includes undertaking situated in industrial area but also include any project or business, a person
may undertake)
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Any person. Provided such land or building forming part of industrial undertaking is used (not owned) by the assessee at least for a period of two years immediately before the date of compulsory acquisition.
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2. Which asset the tax payer should acquire to get the benefit this section?
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Land or Building for industrial purpose.
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3. What is the time limit for acquiring the new asset?
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Such Asset should be acquired or building should be constructed within 3 years from the date of receipt of compensation.
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4. From which date the time limit shall be computed?
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From the date of receipt of compensation whether initial or full. *
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5. Amount of Exemption?
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Investments in the new asset (Including the amount deposited in the deposit scheme) or capital gain whichever is lower.
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6. Possibility of revocation of exemption in the subsequent year?
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If such new asset is transferred within 3 years from the date of acquisition.
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7. In case of transfer of such new asset within 3 years how computation of
capital gain is to be made for such new asset & such gain is Long term or
short term capital gain?
(It is taxable in the Previous Year in which such transfer takes place).
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Sales Consideration of New Asset: XXXX
Less: (Cost of Acquisition of new asset
Capital Gain claim exempted earlier
under section 54 D) XXXX
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Short term Capital Gain XXXX
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8. Whether Benefit of scheme is available?
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Yes
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D.
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Section 54EC: Long Term Capital Gain not to be charged if investment in Long Term Specified Assets i.e. Bonds of N.H.A.I. or R.E.C.
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1. Who can claim benefit of this section?
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Any person.
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2. Which asset the tax payer should acquire to get the benefit under this section?
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Bonds issued by the NHAI or REC redeemable after 3 Years and issued after April1, 2006.
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3. What is the time limit for acquiring the new asset?
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Such Asset should be acquired within 6 months from the date of transfer of original asset. However following should be considered:
(1) Upto 30th September, 2006: If Long Term Capital Asset is transferred between 29th September, 2005 and 31st December, 2005.
(2) Upto 31st December, 2006: If Long Term Capital Asset is transferred between 1st January, 2006 and 30th June, 2006.( Order F. No.142/09/2006 dated 30th June, 2006).
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4. From which date the time limit shall be computed?
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From the date of transfer of Long Term Capital Asset or from the date of receipt of compensation initial or full. *
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5. Amount of Exemption?
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Investments in the new asset (Including the amount deposited in the deposit scheme) or capital gain whichever is lower. (But from April 1, 2007 maximum investment allowed in such bonds is restricted to Rs.50 Lacs.
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6. Possibility of revocation of exemption in the subsequent year?
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If such new asset is transferred or it is converted into money or a loan is taken on the security of the new asset within 3 years from the date of acquisition.
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7. In case of transfer of such new asset within 3 years how computation of
capital gain is to be made for such new asset & such gain is Long term or
Short term capital gain?
(It is taxable in the Previous Year in which such transfer takes place).
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The amount of Long term Capital Gain on transfer of Original Asset not charged to tax due to such investment is chargeable as Long Term Capital Gain in the year of transfer of such bonds.
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8. Whether Benefit of scheme is available?
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No.
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9. Notes: The Benefit of Section 54 EC is available to capital gain arising on transfer of depreciable assets. [CIT v/s
Assam Petroleum Industries Private Limited].
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E.
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Section 54F: Capital Gain arises on transfer of Long Term Capital Asset other than Residential House Property.
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1. Who can claim benefit of this section?
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Individual or H.U.F.
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2. Which asset the tax payer should acquire to get the benefit this section?
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Residential House Property provided that on the date of transfer of Original Long Term Capital Asset the assessee does not own more than one residential house property. Moreover He should not purchase a residential house within 2 years or construct within 3 years from the date of transfer of original capital asset except the new one.
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3. What is the time limit for acquiring the new asset?
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Purchase: 1 Year before transfer or within year from the date of transfer.
Construction: Within 3 years from the date of transfer construction should be completed.
(Either of the two conditions should be satisfied But if both the conditions are satisfied then also there is no problem.)
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4. From which date the time limit shall be computed?
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From the date of transfer of original Capital asset but in case of compulsory acquisition from the date of receipt of compensation whether initial or full. *
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5. Amount of Exemption?
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Amount invested to acquire the new asset
Amount of Capital Gain X -----------------------
Net Sale Consideration
Net Sale Consideration = Full Value of
Sale ConsiderationExpenses on Transfer
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6. Possibility of revocation of exemption in the subsequent year?
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Consequences
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(a) If such new asset is transferred within 3 years from the date of purchase / construction; or
(b) Ifassessee purchases, within a period of two years or constructs within a period of 3 years a residential house from the date of transfer of Original Capital asset except the new one.
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Capital Gain on transfer of such new asset will be termed as short term capital asset and the capital gain which was claimed as exempt u/s 54 F earlier is taxable as Long term Capital gain in the year in which such new asset is transferred.
Capital Gain which was claimed as exempt earlier u/s 54F is taxable as Long Term Capital Gain in the year in which another residential house is purchased or constructed.
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7. Whether Benefit of scheme is available?
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Yes
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8. Notes:
(a) Cost of the new house includes cost of Land.
(b) If the Transferor allows the transferee to retain and apply a part of total consideration to discharge the mortgage to which such property has been subject to, the amount so applied for discharge for mortgage would have to be excluded from the full value of consideration.
(c) The expenditure incurred on making the house habitable i.e. flooring, wooden work, sanitary work etc. should be considered as investment in purchase of house, subject to condition that payment is made during the period specified in sec. 54 F.
(d) If by applying section 54 F, there is no income in hands of minor child to be added under section 64(1A), the benefit under section 54F cannot be denied to minor child on the ground that father of minor had two residential houses at the time of transfer of the capital asset.
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F.
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Section 54G: Long Term/Short Term Capital Gain arises from the transfer of capital assets in cases of shifting of industrial undertaking from urban area.
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1. Who can claim benefit of this section?
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Any person. The term Capital asset includes Plant, Machinery, Land or Building or Right in Land or Building but does not include Furniture.
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2. Which asset the tax payer should acquire to get the benefit this section?
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Land, Purchase/Construction of Building, New Plant or Machinery in order to shift an undertaking to Rural Area.
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3. What is the time limit for acquiring the new asset?
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Assessee has to acquire within a period of 1 Year before or 3 Years after the date on which such transfer took place.
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4. From which date the time limit shall be computed?
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From the date of transfer.
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5. Amount of Exemption?
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Investments in the new asset (Including the amount deposited in the deposit scheme) or capital gain whichever is lower.
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6. Possibility of revocation of exemption in the subsequent year?
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If such new asset is transferred within 3 years from the date of acquisition.
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7. In case of transfer of such new asset within 3 years how computation of
capital gain is to be made for such new asset & such gain is Long term or
Short term capital gain?
(It is taxable in the Previous Year in which such transfer takes place).
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Sales Consideration of New Asset: XXXX
Less: (Cost of Acquisition of new asset
Capital Gain claim exempted earlier
under section 54 G) XXXX
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Short term Capital Gain XXXX
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8. Whether Benefit of scheme is available?
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Yes
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9.Notes: (a) The Cost of New Asset includes expenses incurred in relation to acquiring Land, Building, or Plant and
Machinery.
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G.
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Section 54GA: Long Term/Short Term Capital Gain arises from the transfer of capital assets in cases of shifting of industrial undertaking from urban area to SEZ.
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1. Who can claim benefit of this section?
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Any person. The term Capital asset includes Plant, Machinery, Land or Building or Right in Land or Building but does not include Furniture.
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2. Which asset the tax payer should acquire to get the benefit this section?
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Land, Purchase/Construction of Building, New Plant or Machinery in order shifts an undertaking to Rural Area.
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3. What is the time limit for acquiring the new asset?
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Assessee has to acquire within a period of 1 Year before or 3 Years after the date on which such transfer took place.
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4. From which date the time limit shall be computed?
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From the date of transfer.
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5. Amount of Exemption?
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Investments in the new asset (Including the amount deposited in the deposit scheme) or capital gain whichever is lower.
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6. Possibility of revocation of exemption in the subsequent year?
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If such new asset is transferred within 3 years from the date of acquisition.
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7. In case of transfer of such new asset within 3 years how computation of
capital gain is to be made for such new asset & such gain is Long term or
Short term capital gain?
(It is taxable in the Previous Year in which such transfer takes place).
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Sales Consideration of New Asset: XXXX
Less: (Cost of Acquisition of new asset
Capital Gain claim exempted earlier
under section 54 GA) XXXX
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Short term Capital Gain XXXX
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8. Whether Benefit of scheme is available?
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Yes
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9.Notes: (a) The Cost of New Asset includes expenses incurred in relation to acquiring Land, Building, or Plant and
Machinery.
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* Section 54 H: Extension of Time limit for Acquiring new Asset.
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1. Initial Compensation
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As we know in case of Compulsory Acquisition, Capital Gain will be taxable in the Previous year in which compensation is received whether Part or Full.
For availing the benefit of exemption U/S 54, 54B, 54D, 54EC, 54F the new asset should be acquired within prescribed time limit. But such time period shall be computed from the date receipt of such compensation. Even if the initial compensation is received in parts then such period shall be determined on the basis such different dates of receipts.
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2. Enhanced Compensation
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For availing the benefit of exemption U/S 54, 54B, 54D, 54EC, 54F, such specified period shall be computed from the date on which such enhanced compensation is received.
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DEPOSIT SCHEME: If the new asset is not acquired upto the due date of submission of Return of Income of the previous year in which Original Asset is transferred, the taxpayer has to deposit the unutilized amount in Capital Gain Deposit Scheme with a nationalized bank and proof of such deposit should be attached with Return of Income in order to avail the benefit of exemption.
Now the taxpayer has to withdraw from this account for acquiring the new asset. If the deposit amount is not utilized within stipulated time period as stated in Point 3 of each exemption then unutilized amount on the expiry of such time period will be taxable in the previous year in which such period expires as Long Term or Short Term Capital Gain depending upon the Original Capital Gain. It is to be noted that for section 54 & 54 F such period is 3 years.
# Transfer includes compulsory acquisition.
# In order to take benefit of Section 54 B and 54 D it should be ensured that the investment in the new asset is made only after effecting transfer of capital asset.
# It will be advisable that instead of selling or converting assets acquired under section 54, 54B, 54D, 54 F, 54 G and 54GA into money, the tax payer should obtain loan against the security of such asset to meet exigency.
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