{"id":768,"date":"2023-08-18T17:40:36","date_gmt":"2023-08-18T12:10:36","guid":{"rendered":"https:\/\/xpertslegal.com\/blog\/?p=768"},"modified":"2023-08-18T17:40:36","modified_gmt":"2023-08-18T12:10:36","slug":"section-54-of-income-tax-act","status":"publish","type":"post","link":"https:\/\/xpertslegal.com\/blog\/section-54-of-income-tax-act\/","title":{"rendered":"Section 54 of Income Tax Act"},"content":{"rendered":"

Capital gains exemption under Section 54 of Income Tax Act<\/u><\/strong><\/h1>\n

This provision provides an exemption on capital gains tax when an individual or Hindu Undivided Family (HUF) sells a residential property and invests the proceeds in purchasing another residential property. The exemption is available to individuals and HUFs who have made long-term capital gains from the sale of a residential property. The property being sold should be a residential property, and the property purchased to claim the exemption should also be a residential property. To avail the exemption, the taxpayer must invest the capital gains either one year before the sale or within two years after the sale of the property. Alternatively, the taxpayer can also construct a residential property within three years from the date of sale.<\/p>\n

Amount of exemption<\/u><\/strong><\/h2>\n

The exemption amount is the lower of either the capital gains arising from the sale of the property<\/u> or the cost of the new residential property purchased or constructed. In terms of capital Gains, it is the amount of long-term capital gains arising from the sale of a residential property, or the cost of the new residential property purchased or constructed. For example, if the capital gains from the sale of the old residential property amount to Rs. 20 lacs, but the taxpayer invests Rs. 18 lacs in the purchase or construction of a new residential property, the exemption would be limited to Rs. 18 lacs\u2014the lower of the two amounts. The capital gains that is liable for taxation<\/a> will be the balance of both, which is Rs 2 lacs. But it is to be noted that the new residential property purchased to claim the exemption has a lock-in period of three years. The taxpayer cannot sell or transfer the new property within three years from the date of its purchase. If the property is sold within three years, the capital gains tax exemption claimed earlier would be revoked, and the capital gains tax would become applicable.<\/p>\n

Eligibility Criteria<\/strong><\/h3>\n

To claim the exemption under Section 54, the taxpayer must fulfill the following conditions:<\/p>\n