Capital Gain exemption: Section 54

Asset to be transferred: Residential house property
Asset on which capital gain to be invested: Residential house property in India

• Individual / HUF

• The capital asset transferred should be a residential house property.
• The exemption is available only in respect of Long term capital Gain
• The new house property should be purchased one year before or two years after the date of transfer (3 Years in case of construction).

• Amount invested in new house property or capital gain whichever is less

• Unutilised capital gain can be claimed as exemption by depositing the same in the capital gain deposit A/c scheme with any nationalised bank before the due date of filing return of income.
• If the amount in the capital gain deposit A/c scheme remains unutilised for a period of two years (in case of purchase) or 3 years (in case of construction), the unutilised amount will be taxable as LTCG in the PY in which the 2 years or 3 years as the case maybe expires.

• The new residential house property should not be transferred within a period of three years from the date of purchase or construction.
• If transferred, the cost of new asset shall be reduced by the amount of capital gain exempted earlier while calculating capital gain in the year of transfer.
• By reducing the capital gain from the cost of asset, the amount of capital gain exempted earlier is indirectly chargeable to tax in the year of sale of house property.