14 September 2009
There is a house property which a person wants to sell and out of the sale proceeds wants to purchase a shop. Now, the provision in capital gains is that a person is not liable for LTCG only if he purchases a new house property from the sale proceeds of the old HP. What about a SHOP ? Is there a liability for LTCG on purchase of SHOP instead of HP ? If YES, then is there any way of escaping the LTCG ?
14 September 2009
Section 54 states as under: 8354. 84[(1)] 85[86[Subject to the provisions of sub-section (2), where, in the case of an assessee87 being an individual or a Hindu undivided family], the capital gain arises from the transfer of a long-term capital asset 88[***], being buildings or 89lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head “Income from house property†(hereafter in this section referred to as the original asset), and the assessee has within a period of 90[one year before or two years after the date on which the transfer took place purchased91], or has within a period of three years after that date constructed, a residential house, then], instead of the capital gain being charged to income-tax as income of the previous year in which the transfer took place, it shall be dealt with in accordance with the following provisions of this section, that is to say,—
(i) if the amount of the capital gain 92[is greater than the cost of 93[the residential house] so purchased or constructed (hereafter in this section referred to as the new asset)], the difference between the amount of the capital gain and the cost of the new asset shall be charged under section 45 as the income of the previous year; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be nil; or
(ii) if the amount of the capital gain is equal to or less than the cost of the new asset, the capital gain shall not be charged under section 45; and for the purpose of computing in respect of the new asset any capital gain arising from its transfer within a period of three years of its purchase or construction, as the case may be, the cost shall be reduced by the amount of the capital gain.
Hence the person has to purchase a residential house to get exemption u/s 54 or 54F
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