- Section 54F of the Income Tax Act 1961 prescribes exemptions from capital gains on transfer of any long term capital asset except residential house property and subsequently making an investment in a residential house property.
- This exemption is only available to Individual and Hindu Undivided Family (HUF).
- The asset to be transferred should be a long term capital asset except residential house property.
- The asset to be acquired for claiming exemption under this section should be a residential house property.
- Time limit for claiming exemption: The residential house property should be purchased within a period of 1 year before or 2 years after the date of transfer or constructed within 3 years from the date of transfer of long term capital asset.
- CGAS Scheme: The provisions relating to CGAS Scheme are the same as prescribed under section 54 of the Act.
- Amount of exemption:
- If net sales consideration is fully utilized in the purchase or construction of new house, then the entire amount capital gains would be exempt.
- If net consideration is not fully utilized, then the amount of capital gains which is exempt shall be calculated using the following formula:
LTCG * Cost of new asset/Amount Deposited in CGAS Scheme
Net Sales Consideration
- Lock in period: The new residential house property should not be transferred within 3 years from the date of its acquisition. If it is transferred, then exemption claimed earlier shall be withdrawn and amount of exemption shall be taxable as LTCG in the year in which such property is transferred.
- Note: The assessee should not own more than 1 residential house property (other than the property acquired for claiming exemption) on the date of transfer of long term capital asset.
- Note: Assessee should not purchase within 1 year or construct within 3 years after the date of transfer any other house property. (other than the property acquired for claiming exemption)
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