Table of Contents
1. What is section 54 of Income-tax Act?
Section 54 of Income-tax Act provides exemption in respect of long term capital gain which arises during sale/transfer of residential house property.
2. Can I claim exemption under section 54 in respect of short term capital gain?
No, exemption under section 54 can be claimed only on long term capital gain.
3. When can I claim exemption under section 54?
Exemption under section 54 is available only when a capital gain arising from transfer of a residential house property is invested in purchase/construction of a new residential house property in India.
4. Who can claim exemption under section 54?
Only Individual / HUF can claim exemption under section 54.
5. When should the new house property be purchased?
The new house property should be purchased 1 year before or 2 years after the date of transfer (3 Years in case of construction).
6. What is the maximum amount of exemption under section 54?
Amount invested in new house property or capital gain whichever is less
7. Can I take deduction in respect of purchase of two residential house properties?
- Yes, Exemption can be availed in respect of TWO residential house property purchased or constructed in India when the capital gain is less than 2 crores.
- However this is available only once in a life time.
8. Can I claim exemption for purchase of two residential house property if my capital gain is more than 2 crore?
No, if the capital gain exceeds 2 crores then the exemption can be availed in respect of only ONE residential house property purchased or constructed in India.
9. What is capital gain account scheme?
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.
10. What if the amount in capital gain account scheme is not utilized within a specified period?
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), then the unutilised amount will be taxable as long term capital gain in the PY in which the 2 years or 3 years as the case maybe expires.
11. How many residential house property can be purchased/constructed?
Only one house property can be purchased or constructed for claiming exemption under section 54.
12. What happens if the entire amount of capital gain is not invested in purchase/construction of a new residential house?
The amount of capital gain which is not invested is charged to tax as long-term capital gains under section 45.
13. Can I get exemption for purchase of residential house outside India?
No, Exemption under section 54 can be claimed only in respect of residential house property situated in India.
14. Will the exemption be withdrawn if the new house property is transferred within 3 years?
Yes, 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.