Meaning of Capital Gain has already been explained in one of the previous articles on this site, now we come to a part where deductions available under this head is dealt with. Deductions as we all know is a sum which is reduced from the amount of tax or taxable amount, in order to provide a benefit or relief to the assessee on whom the tax or taxable amount is computed. Deductions under head Capital Gain are all related to long term gains and not short term gains. Now coming to the deductions under head Capital Gains which is dealt under section 54.
Under section 54
Eligible Assessee: Exemption available to an individual and hindu undivided family (HUF).
Eligible asset sold: – residential house property (holding period of minimum 3 years).
Asset to be acquired for exemption – residential house property.
Time limit for acquiring the asset – purchase: 1 year back or 2 years forward; construction: 3 years forward from date of transfer.
Exemption amount – invested amount in new asset or capital gain whichever is lower.
Under Section 54B
Eligible Assessee:Exemption available to Individual.
Eligible asset sold – agricultural land which has been used by the assessee himself or by his parents for agricultural purposes during the last two years before transfer.
Asset to be acquired for exemption – any other agricultural land (Urban or rural).
Time limit for acquiring the asset – 2 years from date of sale.
Exemption amount – investment in the agricultural land or capital gain whichever is lower.
Under Section 54EC
Eligible assessee: Exemption available to any person.
Eligible asset sold – any long term capital assets (minimum holding period of 3 years)
Asset to be acquired for exemption – bonds of National Highway Authority Of India (NHAI) or Rural Electrification Corporation (REC).
Time limit for acquiring the asset – within 6 months from date of sale.
Exemption amount – investment in the new capital asset or capital gain whichever is lower. (Limit of Rs. 50 lakhs in a year)
Under Section 54F
Eligible assessee:Exemption available to individual and hindu undivided family (HUF).
Eligible asset sold – any long term asset (except a residential house property) provided on the date of transfer the person does not own more than one residential house property applicable from assessment year 2001-02 (except the new house).
Asset to be acquired for exemption – residential house property.
Time limit for acquiring the asset – purchase: 1 year back or 2 years forward; construction:Eligible assessee: 3 years forward from date of transfer.
Exemption amount – will be as per the given formula: Investment in New Asset/Net sales Consideration X Capital Gain
Capital Gain Deposit Scheme
Under this scheme the assessee can deposit the sum received from sale of capital asset in a special account called capital gain deposit scheme, if he doesn’t want to immediately use the sum for the given purposes as above. After a specified time he can utilize it for claiming the exemptions as available. This account is opened in bank and sum deposited in this account until utilized. This scheme is applicable to section 54, 54B and 54F but not to section 54EC.
