Capital gains & section 54
This query is : Resolved
12 October 2014
Dear Expert,
Refer appended mail, I seek clarification on my understanding of the below exemptions
If I have 2 residential flats and I sold one of them and invest the capital gains in another new property, will I be able to claim exemption under section 54.
Is my understanding correct that if I sell any other long term asset for example land other than a residential house, and if out of the consideration, if I invest in purchase or construction of a residential house then exemption shall not be available if I own more than one residential house, other than new flat on the date of transfer.
Pls confirm on my understanding
Exemptions
Section 54:
In case the the immovable property sold / transferred is a residential house, and if out of the capital gains, a new residential house is constructed within 3 years, or purchased 1 year before or 2 years after the date of transfer, then exemption on Long Term Capital Gain is available on the amount of investment in the new asset to the extent of the capital gains. It may be noted that the amount of capital gains not appropriated towards purchase or construction of a new house within 3 years may be deposited in the Capital Gains Account Scheme of a public sector bank before the due date of filing of Income Tax Return. This amount should subsequently be used for purchase or construction of house.
Section 54F:
When the asset transferred is a long term capital asset other than a residential house, and if out of the consideration, investment in purchase or construction of a residential house is made within the specified time as in sec. 54, then exemption from the capital gains will be available as:
1.If cost of new asset is greater than the net consideration received, the entire capital gain is exempt.
2.Otherwise, exemption=Capital Gains x Cost of new asset/ Net consideration. It may be noted that this exemption is not available, if on the date of transfer, the assessee owns any house other than the new asset.
It may be noted that the Finance Act 2000 has provided that with effect from assessment year 2001-2002, the above exemption shall not be available if assessee owns more than one residential house, other than new asset, on the date of transfer. Investment in the Capital Gains Account Scheme may be made as in Sec.54.
Refer appended mail, I seek clarification on my understanding of the below exemptions
If I have 2 residential flats and I sold one of them and invest the capital gains in another new property, will I be able to claim exemption under section 54.
Is my understanding correct that if I sell any other long term asset for example land other than a residential house, and if out of the consideration, if I invest in purchase or construction of a residential house then exemption shall not be available if I own more than one residential house, other than new flat on the date of transfer.
Pls confirm on my understanding
Exemptions
Section 54:
In case the the immovable property sold / transferred is a residential house, and if out of the capital gains, a new residential house is constructed within 3 years, or purchased 1 year before or 2 years after the date of transfer, then exemption on Long Term Capital Gain is available on the amount of investment in the new asset to the extent of the capital gains. It may be noted that the amount of capital gains not appropriated towards purchase or construction of a new house within 3 years may be deposited in the Capital Gains Account Scheme of a public sector bank before the due date of filing of Income Tax Return. This amount should subsequently be used for purchase or construction of house.
Section 54F:
When the asset transferred is a long term capital asset other than a residential house, and if out of the consideration, investment in purchase or construction of a residential house is made within the specified time as in sec. 54, then exemption from the capital gains will be available as:
1.If cost of new asset is greater than the net consideration received, the entire capital gain is exempt.
2.Otherwise, exemption=Capital Gains x Cost of new asset/ Net consideration. It may be noted that this exemption is not available, if on the date of transfer, the assessee owns any house other than the new asset.
It may be noted that the Finance Act 2000 has provided that with effect from assessment year 2001-2002, the above exemption shall not be available if assessee owns more than one residential house, other than new asset, on the date of transfer. Investment in the Capital Gains Account Scheme may be made as in Sec.54.
12 October 2014
Yes you can get exemption u/s 54 if you sell one of your residential house property and purchase or construct another one within the time period mentioned in section 54. You are also correct that for a capital asset other than residential house you can get section 54F exemption on purchase or construction of residential house property only if do not have any other residential property other than new one on the date of transfer.
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12 October 2014
Dear Expert,
1) Considering the above example only, suppose a individual holds 4 residential flats in his name and sells one flat and invests the capital gains from the proceeds of that flat in another new residential flat, will the individual be allowed exemption under section 54 for those capital gains of the flat he sold even though he had 3 other residential flats on the date of sale.
I have cited residential flats only as the assets held for the above example. Is there any limit on number of residential flats a individual can hold in his name for claiming exemption under section 54.
2) For example on capital gains of say 50 lacs from sale of a long term asset like land, can one invest half i.e 25 lacs in 54EC NHAI/REC bonds and other half i.e 25 lacs in purchasing a new residential flat assuming the individual does not hold any other residential flat other than the purchase of new flat?
3) 3rd query is if for example on capital gains of say 50 lacs from sale of long term asset specifically a residential flat, can one invest half in 54EC bonds and other half of 25 lacs in purchasing a new residential flat and claim exemption under sectio 54 even if that individual has say 1 existing residential flat already.
1) Considering the above example only, suppose a individual holds 4 residential flats in his name and sells one flat and invests the capital gains from the proceeds of that flat in another new residential flat, will the individual be allowed exemption under section 54 for those capital gains of the flat he sold even though he had 3 other residential flats on the date of sale.
I have cited residential flats only as the assets held for the above example. Is there any limit on number of residential flats a individual can hold in his name for claiming exemption under section 54.
2) For example on capital gains of say 50 lacs from sale of a long term asset like land, can one invest half i.e 25 lacs in 54EC NHAI/REC bonds and other half i.e 25 lacs in purchasing a new residential flat assuming the individual does not hold any other residential flat other than the purchase of new flat?
3) 3rd query is if for example on capital gains of say 50 lacs from sale of long term asset specifically a residential flat, can one invest half in 54EC bonds and other half of 25 lacs in purchasing a new residential flat and claim exemption under sectio 54 even if that individual has say 1 existing residential flat already.
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13 October 2014
1) Yes as there is no such condition u/s 54.
2) The only notable difference is that for claiming exemption u/s 54F you have to invest sale consideration rather than capital gain.
3) Yes
2) The only notable difference is that for claiming exemption u/s 54F you have to invest sale consideration rather than capital gain.
3) Yes
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