capital gain

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amit aggarwal (Querist)
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10 January 2011 if an asesse (resident of india) had sold the property(long term asset) situated in india in the previous year 2009-2010. and purchased the new property in foreign(kuwet).
if he is eligible to take deduction under section 54 or not.??

Guest

Guest (Expert)

10 January 2011 Very interesting query. There is no restriction u/s 54 to make investment in residential house in Kuwait. You may dare to claim exemption u/s 54 by purchasing a residential house in Kuwait.

amit aggarwal

amit aggarwal (Querist)
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11 January 2011 and what are the provisions if he is a NRI ??

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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18 July 2024 Under Section 54 of the Income Tax Act, 1961, an individual can claim an exemption from capital gains tax arising from the sale of a long-term residential property situated in India if certain conditions are met. These conditions include:

1. **Nature of Asset**: The asset sold must be a long-term capital asset, specifically a residential house property.

2. **Utilization of Sale Proceeds**: The entire amount of capital gains (or if less, the amount invested in a new property) must be utilized to purchase or construct another residential house property in India. Alternatively, it can be used to purchase specified bonds under Section 54EC.

### Eligibility of NRI under Section 54:

If the assessee is a Non-Resident Indian (NRI), the eligibility under Section 54 differs slightly:

- NRIs are eligible to claim the benefit under Section 54 for exemption from capital gains tax on sale of a residential property in India, provided they fulfill all other conditions (such as investing in another residential property in India).

- The timeline and conditions for reinvestment remain the same as for residents, i.e., the new property must be purchased within 1 year before or 2 years after the date of transfer of the original property, or constructed within 3 years after the date of transfer.

### Purchase of Property in a Foreign Country (like Kuwait):

However, the exemption under Section 54 is specifically for properties purchased or constructed in India. Therefore, if the individual purchases a property in a foreign country (such as Kuwait), they would not be eligible to claim the exemption under Section 54.

### Tax Implications for Investment in Foreign Property:

- **Capital Gains Tax**: If the capital gains from the sale of the property in India are not invested in another residential property in India or in specified bonds under Section 54EC, then the capital gains tax will be applicable.

- **Taxation in Kuwait**: The tax implications in Kuwait would depend on the tax laws of Kuwait and any Double Taxation Avoidance Agreement (DTAA) between India and Kuwait.

### Conclusion:

In summary, if the assessee is a resident Indian, they can claim exemption under Section 54 if they reinvest the capital gains from the sale of a residential property in another residential property in India or in specified bonds. For NRIs, the conditions are similar, but the exemption applies only to investments in Indian residential properties. Purchasing a property in a foreign country (like Kuwait) does not qualify for exemption under Section 54 of the Income Tax Act. Therefore, in the scenario where the new property is in Kuwait, the assessee would not be eligible to claim the deduction under Section 54.