Income tax query capital gain & exemption

Long-Term Capital Gain Exemption For long-term capital gains arising from the transfer of assets on or after July 23, 2024, the tax exemption under sections 54, 54F, and 54EC requires investment of an amount equal to the sale consideration minus the cost of acquisition.

 Indexed Cost of Acquisition The second proviso to section 48 of the Income Tax Act provides that the benefit of indexed cost of acquisition is not available for assets transferred on or after July 23, 2024.

Tax Liability Calculation When calculating the tax liability for long-term capital gains, you have the option to choose between: - Tax Rate of 12.5% without Indexation: Pay tax at 12.5% of the long-term capital gains without claiming the benefit of indexation. - 

*Tax Rate of 20% with Indexation*: Pay tax at 20% of the long-term capital gains after claiming the benefit of indexation, but this option is not available for assets transferred on or after July 23, 2024. Key Points - 

*No Indexation Benefit for Exemption*: For exemptions under sections 54, 54F, and 54EC, the amount to be invested is calculated without considering the indexed cost of acquisition for assets transferred on or after July 23, 2024. -

 *Tax Calculation Options*: You can choose between paying tax at 12.5% without indexation or 20% with indexation (if the asset was transferred before July 23, 2024) when calculating the tax liability [1].

Dear Sir

Please refer to 2nd proviso to Sec 112(1)(ii)

"Provided further that in the case of transfer of a long-term capital asset, being land or building or both, which is acquired before the 23rd day of July, 2024, where the income-tax computed under item (B) exceeds the income-tax computed in accordance with the provisions of this Act, as they stood immediately before their amendment by the Finance (No. 2) Act, 2024, such excess shall be ignored;"

Accordingly even for properties transferred post July 23, 2024, lower of 12.5% without indexation and 20% with indexation is applicable provided the property was acquired before July 23, 2024.

No sir, only in case tax computation we have option to choose. But In capital gain computation only cost has to be considered & not indexed cost. It's confirmed. Second proviso to section 48 clearly says this & also ICAI study mat.

My comment was on and for tax computation perspective only not on calculation of Capital gains.

Section 54 exemption works as follows for residential property sales.

Eligibility: You sold a residential house property held for more than 24 months (LTCG). The gain is reinvested in purchasing or constructing one new residential property in India.

Timeline:
- Purchase: within 2 years from the date of sale
- Construction: within 3 years from the date of sale
- If the new property is purchased before the sale: within 1 year before the date of sale

Exemption amount: the lower of the actual LTCG or the cost of the new property.

Capital Gains Account Scheme: if you have not purchased the new property by the ITR filing date (July 31 for individuals), deposit the unutilised gain in a Capital Gains Account with a designated bank before filing ITR. Claim the exemption in Schedule CG. The amount can be withdrawn later when you actually purchase.

Reporting in ITR-2: the gain goes in Schedule CG Part B (LTCG on immovable property). The exemption under Section 54 is claimed in sub-item 3(i) of the schedule.

This [Section 54 capital gains exemption guide](https://taxgarden.in/blog/capital-gains-exemption-section-54-54f-54ec) covers the timeline rules, the Capital Gains Account scheme, and common mistakes.