Example
In case,we sell 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)
- Only Sale of Residential House covered (Residential House means Building and land appurtenant to building, vacant land not covered)
- Income from Such House should be chargeable under Income from House Property
- Person should invest the amount of LTCG in purchasing new property or Construction of a new property
Time Period for Purchasing New House
- 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 of Long Term Capital Gain
- Amount Invested
whichever is lower
Q7 A
Mr. Sagar, a resident individual acquired a plot of land at a cost of Rs. 75,000 in June,
- He constructed a house for his residence on that land at a cost of Rs. 1,25,000 in the
financial year 2001-02.
He transferred the house for Rs. 15,00,000 in May, 2015 and acquired another residential
house in June, 2015 for Rs. 8,00,000.
He furnishes other particulars as under
Cost inflation index details are given below:
Financial Year Cost Inflation Index
1999 – 2000 389
2001 – 2002 426
2015 – 2016 1081
Compute Income from Capital Gain of Mr. Sagar for the assessment year 2016-17.
View answer
Exemption under Section 54 is available as
- There is transfer of a residential house and
- Sagar is Individual
- Also it is LTCG
- Also new house is purchased within 2 years of transfer
|
Particulars |
Amt |
|
Full Value of Consideration |
1500000 |
|
|
|
|
Less |
|
|
Expenses of Transfer |
|
|
ICOA |
208419 |
|
(75000*1081/389) |
|
|
COI |
317195 |
|
(125000*1081/426) |
|
|
|
|
|
Long Term Capital Gain/(Loss) |
974386 |
|
|
|
|
Less |
|
|
Exemption under Section 54 |
|
|
Lower of |
|
|
Amount Invested |
800000 |
|
LTCG |
974386 |
|
Lower |
800000 |
|
|
|
|
Income from Capital Gain |
174386 |
-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
Q7 B
Suppose in 7A ,new House which was purchased for Rs.800000 in May 15 was later sold for Rs.2000000 in August 2016
View answer
In this case,new house is not used for 3 years,
Hence STCA will be calculated as under
| Particulars | Amt |
| Full Value of Consideration | 2000000 |
| Less | |
| Expenses of Transfer | |
| COA | 0 |
| COI | |
| Short Term Capital Gain/(Loss) | 2000000 |