(under sections 54, 54B, 54D, 54EC)

BY– MD. FURQAN SABRI

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Any long term capital gain, arising to an individual or HUF, from the

sale of residential property (whether self occupied or on rent) will

be exempt to the extent such capital gains invested in the,

i. Purchase of another Residential Property within 1 year before

or 2 years after the due date of transfer of the Property sold

and/or

ii. Construction of Residential house Property within a period of 3

years from the date of transfer.

Provided that the new Residential Property purchased or

constructed is not transferred within a period of 3 years from the

date of acquisition.

iii. The building is owned by an individual or HUF.

iv. Such property was being used as a residential house.

v. Income of such property is chargeable under the head ‘Income from house property’.

vi. The house property was held by the tax-payer for a period exceeding 36 months before transfer.

SOME IMPORTANT POINTS:

In case of allotment of flat under the self-financing scheme of DDA

(or similar scheme of co-operative societies or other institution ) is

treated as construction of house for this purpose.

Exemption is not limited to acquisition of one house property. For

ex. an assessee may purchase two houses, or he can purchase a

House and construct floors of the house so purchased.

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i. If the entire amount of capital gain is equal to or less than the

cost of the new house, then the entire capital gain shall be

exempt

ii. If the amount of Capital Gain is greater than the cost of the

new house, then the cost of the new house shall be allowed as

an exemption

If the new house (purchased or constructed) is transferred within a

period of 3 yrs. of its purchase or construction, the exemption

given earlier will be withdrawn.

The old capital gain and new capital gain shall be treated as short-

term capital gain and chargeable to tax in the previous yr. in which

the new residential house is transferred.

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The Amount of Capital Gain which is not utilised by the

Assessee for the purchase or construction of the new house before

the due date of furnishing of the Income Tax Return then it should

be deposited by him under the Capital Gains Account

Scheme,1988, with specified bank authorised by the central govt.

before the due date of furnishing the return to avail exemption.

The proof of such a deposit shall be attached with the Income Tax

Return.

After such deposit he must utilize the deposit for acquiring the

new house within 3 yrs. From the date of transfer of the old

house.

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Any capital gain, arising to an individual or HUF, from the transfer

of agricultural land situated in urban area is exempt subject to the

following conditions :

i. The agricultural land is owned by an individual or HUF.

ii. The agricultural land was being used by an individual or his

parents for agricultural purposes for a period of two years

immediately preceding the date of transfer.

iii. the assessee has purchased within a period of two years from

the date of transfer any other land for agriculture purpose.

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Any capital gain arising, to any assessee, on the transfer ( land and building used for industrial undertakings ) by way of compulsory acquisition under any law is exempt subject to the following conditions :

i. The land or building used by the assessee for the purpose of an industrial undertaking.

ii. And it has been used for at least 2 years immediately preceding the date of compulsory acquisition.

iii. The assessee has purchased any other land or building or constructed any other building , within a period of 3 years after such transfer, for the purpose of shifting or re-establishing the industrial undertaking or setting up another industrial undertaking.

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Any long-term capital gain arising, to any assessee, on the transfer of

any long term capital asset and invested in any long term specified

asset is exempt subject to the following conditions :

i. A long-term asset is transferred by any assessee (whether

individual, firm, HUF, company or any other)

ii. The investment in long-term specified asset should be made

within 6 months from the date of transfer of the capital asset.

Long-term specified asset means any bond redeemable after 3

years and issued by (on or after 1.4.2007)

a. The National Highway Authority of India

b. The Rural Electrification corporation Limited

“ The return on bonds is taxable income ”.

If the specified asset is transferred (or converted into money or

any loan/advance is taken on the security of specified asset)

within 3 years from the date of their acquisition , the exempted

amount of capital gain shall be chargeable to tax as long-term

capital gain of the previous year in which the new asset is

transferred.