Capital Gain Exemption under section 54F

Being an Indian before investing on a capital asset such as House property we evaluate the source of funding and benefits in tax can be claimed. So while sourcing there come times when we require to sell – off our any other capital asset to own a House property. Finance Bill being favorable towards one house – per family deduction is available on capital gain utilized for such purpose.

Capital Gain – Applicability :

1. Only for Individual and HUF assesses.

2. Capital gain on Long term capital asset other than House property.

3. Should purchase/build residential house property from sale value received by reinvesting.

4. If purchasing then it should have been purchased within 1 year before or 2 years after the date of sale of capital asset.

5. If constructing then house should be constructed within 3 years from the sale date of capital asset.

6. Should own only one residential house other than new house property purchased. So at a time can be owner of 2 house properties.

7. The house property purchased should be in India as amended in Budget 2014.

Also Read: Capital Gains – When and to what extent they are exempted from Tax

Quantum of Deduction available:

  • If re-invested total sale value received for purchase of house property then whole of Long term capital gain will be exempted.
  • If invested part of it, capital gain proportion to the invested amount out of net sale value will be exempted.
  • Assesse also have the option of depositing amount in Capital gain account scheme (CAGS) before filing the income tax return by declaring the year by which it will be used limiting to three years.

Therefore before planning any sale of capital asset which is not exempted by any other way, evaluate this scheme of exemption and save 20 % flat tax on long term capital gain.