Example

In case, we sell Any Capital asset except Residential House,earn LTCG and later purchase another Rsidential House,

Then LTCG on Sale of House will be  exempt

 

Conditions to be Fulfilled

  • Deduction is available only to Individual and HUF
  • This deduction is on LTCG only (Not STCG)
  • Sale of any asset except Residential House covered (Even sale of plot of land covered)
  • Person should invest the amount of LTCG in purchasing new property or Construction of a new property

 

Time Period

  • If Purchased:-1 year before or 2 year after date of transfer
  • If Constructed:-Within 3 years after date of transfer

 

Amount Exempt is

(Amount Invested /Total Consideration)*LTCG

 

Question 1

Jewellery purchased by Mr A for 10 lacs  in June 2010 sold for 20 lacs in July 2015

Expenses on Transfer Rs 14000

House Purchased in Aug 2015 for Rs 14 lacs

CII for 2015-16 is 1081 and 2009-10 is 632

-a-

Exemption under Section 54B  is available as

  • There is transfer of a capital asset not being residential house and
  • Mr A is Individual
  • Also it is LTCG
  • Also new house is purchased within 2 years of transfer

Particulars

Amt

Full Value of Consideration

2000000

 

 

Less

 

Expenses of Transfer

14000

ICOA

1520394

(1000000*1081/711)

 

Long Term Capital  Gain/(Loss)

465606

 

 

Less

 

Exemption under Section 54F

325924

(1400000/2000000)*465606

 

 

 

 

 

Income from Capital Gain

139682 

-ea-

Q2

Solve last question assuming Jewellery was purchased on June 2014

-a-

It is now STCG, hence no exemption under Section 54

Also no indexation benefit will be available as it is not LTCG

Particulars

Amt

Full Value of Consideration

2000000

 

 

Less

 

Expenses of Transfer

0

COA

1000000

COI

14000

Short Term Capital  Gain/(Loss)

986000

 

   

-ea-

Consequences if New Asset Sold within 3 years

If Section 54 benefit claimed,new house should purchased should not be transferred for 3 years.

If transferred,then

STCA will be calculated on Sale of New House

Amount of Capital Gain Exempt earlier will be reduced from Cost while Calculating this STCA

 

Q3

Suppose in  Q1 above,new House which was purchased for 2000000 in May 15 was later sold for 2400000 in August 2016

-a-

In this case, new house is not used for 3 years,

Hence STCA will be calculated as under

Particulars

Amt

Full Value of Consideration

2400000

 

 

Less

 

Expenses of Transfer

0

COA

1674076

(2000000-325924)

 

COI

 

Short Term Capital  Gain/(Loss)

725924  

-ea-

  1. Income from Capital Gains
  2. Exemptions
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About the Author

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CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 6 years. He provides courses for Practical Accounts, Taxation and Efiling at teachoo.com .
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