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Capital gain under section 54

amiya ( ) (114 Points)

27 December 2011

Dear All

There is a equation.

CAPITAL GAIN>NEW HOSE = capital gain-new house will be taxed

Is there any limit?

Suppose we sold in 1 crore and purchase a new house within 6 months in 1.2 crore. Is there any limit for this threshold.

Thanks

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3 Replies

CA Ketan Waghela (Partner at Elite Educare) (356 Points)
Replied 27 December 2011

Amiya ji,

U/S 54 there is no limit in amount that can be exempted. Sec 54states new asset should be purchased within specified time mentioned in the sec.

Exemption will be lower of:

i. Investment in new house or;

ii. Capital Gain

Here, capital gain can be any figure (in lacs, crore etc. depending upon the value of the asset transferred.)

So, if you purchased new house for Rs.1.2 Cr. Out of sale consideration of Rs.1 Cr. The whole CG will be exempted u/s 54.

The same goes for sec. 54B & 54D.

54 EC:

Exemption will be lower of:

i. Investment in new house or;

ii. Capital Gain

iii. 50 Lacs.

So, there is a limit of 50 Lac in Sec. 54EC.

Sec. 54 G & 54 GA:

Exemption will be lower of:

i. Cost incurred for specified asset (purchase or construction) or notified expenses or;

ii. Capital Gain

Sec. 54 F:

Exemption will be:- [cost of new house * CG / Net consideration]

If the exemption is claimed u/s 54 F then amount of exemption will be calculated as above.

Members, Please correct me if I’m wrong.

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Sanat kumar (Chartered Accountant) (265 Points)
Replied 27 December 2011

Hi Amiya,

If you have sold any residential house property and purchase/construct any other reseidential house within the time period specified, then the exemption will be given u/s 54 of the Income tax Act. (And for this you need to invest the capital gain amount for getting the exemption)

In case' you have sold house other than residential house and invested in residential house, then the exemption will be covered u/s 54 F and it will be calculated accordingly. (In this case for getting the full exemption, you need to invest atleast the amount related to net full value consideration of sold house.)

In any case, it will not be covered in 54B, 54EC,54G,GA etc.

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