capital gains-exemption u/s 54f

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Deepti Gunwani (Querist)
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12 March 2011 Assessee had recd. Rs. 18L for the sale of shares (long terms capital asset)during f.y. 10-11.
To claim the exemption u/s 54f, he needs to purchase a new residential house within 2 years or construct within 3 years.

Now, the assessee for the time being wants to deposit this amount to the Capital Gain Account so that he can aftersome time purchase a new house. In that also, he wants that he does not deposit the amount before the return date.

Kindly let me know is that possible that he makes a DD of the same amount from his bank in favour of the person to whom he had sold the shares, keeps the DD with him and on 1st april cancels the DD again. In this way the etry of Rs. 18L will not pertain to fy 10-11. It will appear in fy 11-12

Ranjan Dayal

Ranjan Dayal (Expert)
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15 March 2011 Instead of giving such kind of advice why not you first check whether the particular transaction covered U/s 10(38) or not. since As per sec.10(38)long term capital gain on euity sahare or equity oriented mutual fund are exempt from long term capital gain.

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Deepti Gunwani

Deepti Gunwani (Querist)
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15 March 2011 Thanks sir,

But the shares are not of a listed company and STT is also not appl.
So section 10(38) cannot be used.
Kindly advice whether the procedure stated in previous query can solve the purpose?

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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18 July 2024 If the shares are not of a listed company and Securities Transaction Tax (STT) is not applicable, then Section 10(38) of the Income Tax Act, which provides exemption on long-term capital gains arising from the transfer of equity shares or units of equity-oriented funds on which STT is paid, will not apply. Here’s how you can approach the taxation of such transactions:

1. **Classification of Gains:** Since the shares are not listed and STT is not applicable, the gains from their sale would typically be classified as long-term capital gains (LTCG) if the holding period is more than 24 months, or short-term capital gains (STCG) if the holding period is 24 months or less.

2. **Taxation of Long-Term Capital Gains (LTCG):**
- LTCG from the sale of unlisted shares is taxable at a flat rate of 20%.
- Indexation benefit (adjusting the purchase price for inflation) is not available for unlisted shares.

3. **Taxation of Short-Term Capital Gains (STCG):**
- STCG from the sale of unlisted shares is added to the total income of the individual and taxed at the applicable slab rates.

4. **Reporting and Filing:**
- Report the capital gains from the sale of unlisted shares under the appropriate head in your income tax return (ITR).
- Use ITR-2 or ITR-3, depending on your other sources of income and nature of the transactions.
- Provide accurate details of the sale proceeds, cost of acquisition, and any allowable deductions to compute the taxable capital gains correctly.

5. **Documentation:**
- Maintain all relevant documents such as sale deeds, purchase agreements, and transaction records for audit purposes.

Regarding the procedure mentioned in your previous query, which likely refers to the methods of offsetting capital gains against capital losses or claiming exemptions under specific sections like 54 and 54F for reinvestment in specified assets (like residential property), those provisions apply to different types of assets and specific conditions.

For unlisted shares, the focus would be on correctly computing and reporting the capital gains as per the tax laws applicable to unlisted securities. If there are specific aspects or complications in your case, consulting with a tax professional or chartered accountant would be prudent to ensure compliance with tax regulations and optimize tax liabilities appropriately.