AN assessee may sell land, residential house, shares, jewellery and so on, and invest the amount of capital gains or net consideration, as the case may be, in another residential property and thereby claim exemption both under Section 54 and 54F. But care must be taken to see that the other conditions of the relevant section are not violated.
Example: Details of the assets sold by A (See Table below).
Section 54 requires only the amount of capital gain to be invested in new property.
Section 54F requires the net consideration to be invested in the new property.
Construction of independent residential unit in an existing house, for example, construction of an additional floor in a residential property, also eligible for exemption under Section 54 and 54F.
Where both land and building are sold, care to be taken to see whether these are long-term or short-term capital assets. If the land is long-term, but the building is a short-term capital asset (either because it is newly constructed or it is a depreciable asset), the sale consideration has to be split up so as to compute long-term capital gains with reference to land separately and to avail the benefit of indexation in such computation.
In respect of building, short-term capital gain/loss has to be computed separately.
For the purpose of Section 54 and 54F, cost of plot acquired by the assessee for construction of residential house will also be eligible for exemption along with the cost of construction or acquisition.
Construction can commence before the date of transfer, but completion of construction should be only after the date of transfer. Therefore, expenditure incurred for construction before the date of transfer of the asset are eligible for exemption under Section 54 or 54F so long as the construction is completed within the stipulated period.
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