Table of Contents
1. What is section 54GB of Income-tax Act?
Section 54GB of Income-tax Act provides exemption in respect of Long term capital gains arising from transfer of Residential property (land or house).
2. Can I claim exemption under section 54GB in respect of short term capital gain?
No, exemption under section 54GB can be claimed only on long term capital gain.
3. What asset should be transferred to claim exemption under this section?
To claim exemption under this section the asset transferred should be a residential property being a land or house.
4. How should the capital gain from transfer be used to claim exemption under section 54GB?
- The net sale consideration from the transfer should be used by the assessee for investing in the equity shares of an eligible company before the due date of furnishing of return of income.
- The above mentioned company shall within 1 year from the date of subscription in equity shares by the assessee, utilise the amount for the purchase of new asset.
5. Who can claim exemption under section 54GB?
Exemption under section 54GB is available only to Individuals/ HUF.
6. What is the maximum amount of exemption under section 54GB?
- If entire net consideration is invested, entire capital gain is exempt from tax.
- If the cost of new asset is less than net sale consideration of the transferred asset,
7. What is capital gain account scheme?
Unutilized capital gain can be claimed as exemption by depositing the same in the capital gain deposit A/c scheme with any nationalized bank before the due date of filing return of income.
8. What if the amount in capital gain account scheme is not utilized within the specified period?
If the amount in the capital gain deposit A/c scheme remains unutilised for a period of 1 year from the date of the subscription in equity shares by the assessee, the unutilised amount will be taxable under the head “capital gains” in the PY in which the one year from the date of subscription in equity shares by the assessee expires.
9. What happens if the amount invested in capital gain account scheme is not utilised within the specified period?
The amount not so utilised shall be charged under section 45 in the PY in which the period of three years from the date of the transfer expires.
10. When will the exemption granted under section 54GB be withdrawn?
- If the newly acquired asset is sold within 5 years (3 years in case of computer or computer software acquired by an eligible startup) from date of acquisition, the exemption will be withdrawn.
- If withdrawn, the capital gain exempted earlier would be taxable under the head “capital gain” in the PY in which such transfer took place.
11. If I sell my residential house in the PY 2020-21, can I claim exemption under section 54GB?
- No, the provisions of this section shall not apply to any transfer of residential property made after the 31st March, 2017.
- However, in case of an investment in eligible start-up, the provisions of this section shall apply to any transfer of residential property upto 31st March, 2022.
12. Mr. X transfers residential property in the PY 22-23 and intends to claim exemption of capital gain by investing in an eligible start up. Will he be eligible to claim exemption under this section?
No, this section will no longer be available for claiming exemption after 31st March, 2022.
13. What is an eligible start up?
A company or a LLP which satisfied the following conditions and is engaged in above mentioned eligible business
- It is incorporated on or after the 1st April, 2016 but before 1st April, 2022
- Total turnover does not exceed 100 crore in the previous year
It holds a certificate of eligible business from the Inter-Ministerial Board of Certification as notified by the Central Government.