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
View answer
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 |
Q2
Solve last question assuming Jewellery was purchased on June 2014
View answer
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 |
|
|
|
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
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 |
2400000 |
|
|
|
|
Less |
|
|
Expenses of Transfer |
0 |
|
COA |
1674076 |
|
(2000000-325924) |
|
|
COI |
|
|
Short Term Capital Gain/(Loss) |
725924 |