HOW TO SAVE INCOME TAX ON SALE OF COMMERCIAL PROPERTY II SECTION 54F II CA MANOJ GUPTA

HOW TO SAVE INCOME TAX ON SALE OF COMMERCIAL PROPERTY II SECTION 54F II CA MANOJ GUPTA

Section 54F: Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house:

Any long-term capital gain, arising to an Individual or HUF, from the transfer of any long term capital asset, other than residential house property, shall be exempt in full if the entire net sales consideration is invested in

Purchase of ONE residential house in India within 1 year before or 2 years after the date of transfer of such asset OR
Construction of ONE residential house in India within 3 years after the date of such transfer.
Where part of the net consideration is invested, it will be exempt proportionately.

Exemption = (Capital Gain * Amount Invested) ÷ Net Sale Consideration

Deposit in Capital Gain Account Scheme:

The amount of net consideration, which is not utilized by the assessee for the purchase or construction of the new house before the date of furnishing of the return of income, shall be deposited by him under the Capital Gains Account Scheme, before the due date of furnishing the return.

Exemption is not available where:

(a) the assessee, —

(i) owns more than one residential house, other than the new asset, on the date of transfer of the original asset; or

(ii) purchases any residential house, other than the new asset, within a period of one year after the date of transfer of the original asset; or

(iii) constructs any residential house, other than the new asset, within a period of three years after the date of transfer of the original asset; and

(b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head “Income from house property”.

Consequences if the New House is transferred within a period of 3 years of its Purchase or Construction:

Capital Gain/loss on the transfer of new house will be chargeable to tax under the head capital gain.
Capital exempt earlier u/s 54F shall be treated as a long-term capital gain of the previous year in which the new asset is transferred.

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