Exemptions from Capital Gains under Sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA « on: May 20, 2008, 12:27:00 PM » Long Term Capital Gain from the Transfer of Residential House Property (Section 54) The exemption under the Section 54 is available only an individual or a HUF who transfers (or sells) a residential house/property that results in a long-term capital gain, and then invests the amount of gain in acquiring a new residential house. This exemption is available subject to fulfillment of the following requirements: (i) The transferor shall be an individual or the HUF, (ii) The asset to be transferred must be of long-term capital asset, being buildings or lands appurtenant thereto, being a residential house, (iii) The income from such residential house shall be assessable under the head Income from House Property, (iv) The transferor assessee should purchase a residential house in India within a period of one year before or two years from the date of transfer or construct a residential house within three years from the date of the transfer of the original house. (Construction must be completed within these 3 years.), and (v) The new house property purchased or constructed has not been transferred within a period of three years from the date of purchase or construction. Amount of Exemption. The amount of exemption under section 54 is Equal to the amount of the capital gain if cost of new house property is more than the capital gain, or Equal to the cost of the new house property if the cost is less than the capital gain. Deposit Scheme under Section 54. Where the amount of capital gain is not so utilized for the purchase or construction of a new residential house before the due date of furnishing of the return of income, it shall be deposited by him on or before the due date in an account with a public sector bank in accordance with the Capital Gain Account Scheme, 1988. The amount already utilized on the new house together with the amount deposited shall be deemed to be the amount utilized for the purchase of new house under section 54. If the amount deposited is not utilised for the purpose of purchase or construction of new house within the stipulated period, then the amount not so utilised will be treated as long term capital gain of the previous year in which the period of three years expires. In such case the assessee is entitled to withdraw the amount from the bank. Consequences of Selling the New House Before 3-years. If the new house property is transferred within a period of three years from the date of the purchase or construction, the amount of capital gains arising therefrom, together with the amount of gains exempted earlier, will be chargeable to tax in the year of sale of the house property. To attain this, the amount of exemption under section 54 shall be reduced from the cost of acquisition to the new house, while calculating short-term capital gains on the transfer of the new asset. Capital Gain on the Transfer of Agricultural Land (Section 54B) Capital gains arising on the transfer of land used by an individual or his parents for agricultural purposes for a period of two years immediately preceding the date of transfer is exempt form the tax if the individual assessee has purchased another agricultural land within a period of two years from the date of such transfer (subject to the requirements). (Not covered: Amount of exemption, scheme of deposit and consequences on not meeting the requirements). Capital Gain on Compulsory Acquisition of Land and Building of an Industrial Undertaking (Section 54D) Capital gains arising on the compulsory acquisition of any land or building forming a part of an industrial undertaking is exempt subject to the following requirements: Such land or building was used by the assessee for the purpose of industrial undertaking for two years preceding the date of compulsory acquisition, The assessee has purchased any land or building or constructed a building within 3 years from the date of the receipt of the compensation, and Newly acquired land or building should be used for the purpose of shifting or reestablishing the said undertaking or setting up another industrial undertaking. (Not covered: Amount of exemption, scheme of deposit and consequences on not meeting the requirements). Long Term Capital Gain Exemption for Investment in Certain Bonds (Section 54EC) This exemption is is available an individual, HUF, company or any other person who invests the long term capital gain, within 6 months of a the transfer of the capital asset, in any of the specified bond (issued on or after April 1, 2006) redeemable after 3 years: National Highway Authority of India (NHAI), or Rural Electrification Corporation Ltd. (REC) There is a limit of Rs. 50 lakh on the investments on or after April 1, 2007. The face value of a bond is generally Rs. 10,000 and the rate of return correctly averages about 5.5 to 5.75 per cent. This return is taxable income. Long Term Capital Gain from the Transfer of a Capital Asset other than Residential House Property (Section 54F) The exemption is available only an individual or a HUF who transfers (or sells) a capital asset that results in a long-term capital gain, and then invests the amount of gain in acquiring a new residential house. This exemption is available subject to fulfillment of the following requirements: (i) The transferor assessee should purchase or a residential house in India within a period of one year before or two years from the date of transfer or construct a residential house within three years from the date of the transfer of the original house. (Construction must be completed within these 3 years.), and (ii) The new house property purchased or constructed has not been transferred within a period of three years from the date of purchase or construction. (Not covered: Amount of exemption, scheme of deposit and consequences on not meeting the requirements). Capital Gain on Transfer of Capital assets in Case of Shifting of Industrial Undertaking from Urban Area (Section 54G) This exemption is is available an individual, HUF, company or any other person who transfers the capital assets (being plant, machinery, land or building or any right in the land or building) being used for the purpose of industrial undertaking situated in an urban area to any area other than urban area. The assessee purchases within one year before or 3 years after the date of transfer: (i) Purchases plant or machinery for the purpose of business of industrial undertaking in the area to which the said undertaking has shifted, (ii) Acquires building or land or constructed building for the purpose of his business in the said area, (iii) Shifts the original asset and transferred the establishment in the said area, and (iv) Incurs expenses on such other purpose as may be specified in a scheme framed by Central Government for the purpose of this section. (Not covered: Amount of exemption, and consequences on not meeting the requirements). Capital Gain on Transfer of Capital assets in Case of Shifting of Industrial Undertaking from Urban Area to any SEZ (Section 54GA) This exemption is is available an individual, HUF, company or any other person who transfers the capital assets (being plant, machinery, land or building or any right in the land or building) being used for the purpose of industrial undertaking situated in an urban area to a special economic zone (SEZ). The assessee purchases within one year before or 3 years after the date of transfer: (i) Purchases plant or machinery for the purpose of business of industrial undertaking in the area to which the said undertaking has shifted, (ii) Acquires building or land or constructed building for the purpose of his business in the said area, (iii) Shifts the original asset and transferred the establishment in the said area, and (iv) Incurs expenses on such other purpose as may be specified in a scheme framed by Central Government for the purpose of this section.
Posted on: Sun, 01 Dec 2013 16:11:42 +0000