section 54F of IT act
if the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45.
what does this mean????
It means amount of exemption is calculated as
LTCG X amount INVESTED in NEW residential property / Net consideration
Total LTCG (before exemption) less amount calculated as above is the amount treated as chargeable LTCG (if no other exemption is availed)
lets take an example...
sale considration-10 lakh
coa-9 lakh
capital gain on above-1 lakh..
new residential house purchased of 5 lakh..
now capital gaim exempt=1lakh *5 / 10=50000
(cap gain* value of new asset purchased/sale considration)
I agree with the others,
Even if the cost of the new house is less than the CG, exemption will be allowed as per "investment in new asset * CG / net consideration"(the balance will be taxable as CG) and not the full value of asset.
thanx evryone..... :)
CAclubindia
