This capital gains could be earned out of the sale of residential property, shares, family business, farm house, agricultural land, etc. In this regards, let us today look at some of the tax-exemption provisions u/s 54 of the Income Tax Act.
Sec 54: Sold Residential House, Buying Residential House
Herein the exemption from capital gains tax is available
a) If an individual or HUF sells a residential property
b) After holding it for more than 3 years (i.e. long term capital asset)
c) Invests the GAINS in another property (bought one year prior or two years after the sale / constructed within three years of the sale)
d) The new property acquired is not sold for at least 3 years
Sec 54B: Sold Agricultural Land, Buying Agricultural Land
Herein the exemption from capital gains tax is available
a) If an individual or HUF sells agricultural land
b) Used by him or his parents for at least 2 years
c) Invests the GAINS in another agricultural property within two years
Sec 54F: Sold any Capital Asset, Buying Residential House
Herein the exemption from capital gains tax is available
a) If an individual or HUF sells any capital asset other than residential property
b) After holding it for long term
c) [NOTE THE DIFF] : Invests the ENTIRE SALE PROCEEDS (minus the expenses) in a property (bought one year prior or two years after the sale / constructed within three years of the sale)
d) Taxpayer does not own more than one residential house other than the new exempted asset and neither does he buy any other residential property within one year from the date of sale or construct any other residential property within three years
Sec 54EC: Investment in specified Bonds
Tax Exemption is available if the assessee invests the long term capital gains in the specific 3-year bonds issued by NHAI or REC within 6 months from the sale. One is allowed to invest only upto Rs. 50 lakhs in such bonds in a given financial year.
In addition to the above, other provisions u/s 54 include
Sec 54D: Compulsory Acquisition of Land/Building of an Industrial Undertaking
Sec 54G: Shifting of Industrial Undertaking from Urban Area to any area other than urban area
Sec 54GA: Shifting of Industrial Undertaking from Urban Area to any SEZ
Sec 54GB: Exemption if investment made in a company and the company purchases new asset
