Applicability & Eligible of Section 54F
- This section is applicable to Individual or HUF
- Exemption is allowable for only on Long Term Capital Asset
- Exemption is applicable for transfer of any capital asset not being residential house property
- New One residential house property in India i.e building and land appurtenant there to need to purchase or constructed.
Time line of Purchased or Constructed
- Purchase: Purchase within One year before or two year after the date of transfer
- Construction: Complete construction within 3 years from date of transfer
Exempt Amount u/s 54F
Cost of New Asset* Capital Gain/Net consideration
Transfer of New Asset
New asset transfer within 3 years from date of purchase/construction then exempt capital gain taxable in the previous year of transfer of new asset and treated as Long Term Capital Gain.
Example
| Particulars | Details |
| Amount of gold that you own | 600 grams |
| Purchase price per gram | ₹ 3,000 |
| Purchase price of 600 grams (600 grams x Rs 3000) | ₹18 lakhs |
| Selling price per gram | ₹ 5,500 |
| Total sale price of 500 grams (600 grams x Rs 5500) | ₹33lakhs |
| Capital gains | ₹15 lakhs |
Amount exempt = (Total capital gains x Amount invested in house property) ÷ Net sale proceeds
Situation-1
If sale proceed of all 33 lakh is invested in residential house property then, Amount of exempt is full value of Capital gain
Amount exempt = Full capital gain is exempt= 15 lakhs
Situation-2
If sale capital amount is invested only Rs:18 lakh then
=Exempt amount
=(Total capital gains x Amount invested in house property) ÷ Net sale proceeds
= (15lakh x 18lakh) / 33lakh
= 8.18lakh
Capital Gains Account Scheme
If the assessee is unable to purchase or construct property before the due date of furnishing of return of income for the year of transfer and still wants to save tax he or she can invest / deposit all the unutilized capital gain proceeds of the old house property in Capital Gains Deposit Scheme. In this way the new property can be purchased later and the capital gains from the proceeds of sale of old house property will not be taxable too.
Various conditions are specified for deposition in the Capital Gains Account Scheme in the Income Tax Act. They are:
- This can be done in authorised/approved bank branches. Rural branches of banks are not included.
- The deposition has to be done before the due date for filing income tax returns.
- The deposited amount has to be utilized to purchase/construct the house as per the provisions of the law.
