Plain simple reading of calculation of adjusted total income:-
(2) Adjusted total income referred to in sub-section (1) shall be the total income before giving effect to this Chapter as increased by—
(i) deductions claimed, if any, under any section (other than section 80P) included in Chapter VI-A under the heading “C.—Deductions in respect of certain incomes”; and
(ii) deduction claimed, if any, under section 10AA.
In case you are selling a residential house and your income after indexation + your regular income exceed Rs.20.00 lakhs, in case you claim deduction u/s 54, you are not getting the tax benefit even if you purchase the new house. Only Section 80 P and Section 10AA seem to be allowed exemptions that are not beneficial to any individuals under these circumstances. In effect, rather than paying 20% income tax on LTCG from sale of House, you still have to pay 18.5 even if you invest in a new house within 1 year.
Moreover, when you sell the house within 3 years if you pay 18.5% tax instead of 20%, you would still have to pay short term capital gain with cost of acuisition reduced to the extent of exemption claimed. Will creedit be given under AMT in such cases?
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