Hello all, its my first question in the forum.
If I acquire a LTCG (above 1 Lakh) through selling of Stocks/MF, can i avail tax exemption on it, if i am using it to purachase an Apartment which is in Project Initial Stage and will be completed in 4 years. I have seen some Section 54 but not very clear on that. Say if my LTCG is 2 Lakhs, will i already get 1 lakh normal tax exemption for LTCG and only remaining need to be included for section 54 if possible. Please help me clear the doubt.
Hey Jyothis, welcome to the forum! Here’s a clear explanation on LTCG exemption with respect to buying a residential property:
Long Term Capital Gains (LTCG) from sale of listed equity shares or equity-oriented mutual funds over ₹1 lakh in a financial year are taxable at 10% without indexation under Section 112A.
So if your LTCG is ₹2 lakhs, the first ₹1 lakh exemption applies here directly. You pay 10% tax on the remaining ₹1 lakh LTCG.
Section 54 provides exemption on LTCG arising from sale of a long-term capital asset (other than equity shares and equity-oriented MF), if the capital gains are invested in a residential house property (either new or under construction).
This means Section 54 exemption does NOT apply to LTCG from sale of equity shares or equity mutual funds.
LTCG from sale of stocks/MFs = ₹2 lakhs.
You get ₹1 lakh exemption as per Section 112A.
You pay 10% tax on remaining ₹1 lakh LTCG.
Buying an apartment under project construction does NOT give exemption under Section 54 on LTCG from stocks/MF.
You can claim exemption under Section 54 by investing the gains in a residential house property (including under-construction property) within specified timelines.
But this doesn’t apply for equity shares or equity mutual funds LTCG.
Summary:
LTCG from stocks/MFs: ₹1 lakh exempt under Section 112A, balance taxed at 10%.
No Section 54 exemption for LTCG on equity shares/MF.
Section 54 applies only for LTCG from other capital assets (e.g. property, land).
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