Long term capital gains on sale of property used for residence:

Section 54 of the Income Tax Act provides relief to an individual or Hindu Undivided Family from capital gains arising from transfer of a residential house held by the assessee at least for a period of 36 months. Such capital gains to the extent utilised for purchase (within 1 year before or 2 years after the date of sale) or construction (within 3 years of date of sale) of a residential house is exempt u/s 54. If the amount of capital gains is proposed to be utilised, but is not so utilised up to the due date for filing of return then, the amount of unutilised capital gain is required to be deposited in the “Capital Gains Account Scheme, 1988”.

Capital gains on transfer of capital assets other than a residential house:

Section 54F of the Income Tax Act exempts long term capital gains arising from transfer of any long term capital asset other than a residential house. Such capital gains to the extent utilised for purchase (within 1 year before or 2 years after the date of sale) or construction (within 3 years of date of sale) of a residential house is exempt u/s 54F. To be entitled to this exemption the assessee should not own more than one residential house other than the house sold as on the date of transfer. The provisions of depositing the unutilised capital gain in the “Capital Gains Account Scheme, 1988” as explained above is also applicable.

Capital gains not to be charged on investment in specified assets:

Section 54EC of the Income Tax Act provides relief from capital gains arising from transfer of any capital asset on or after 1st April 2000 shall be exempt to the extent such capital gain is invested within a period of 6 months after the date of such transfer in the long term specified asset provided such specified asset is not transferred or converted into money within a period of 3 years from the date of its acquisition. However, the investment made on or after 1st April 2007 in the long term specified asset by assessee during any financial year cannot exceed Rs. 50 lakh. For claiming this exemption, the capital gains have to be invested (investment not to exceed Rs. 50 lakh) within 6 months of the date of transfer in notified bonds issued by:

  • a) National Highways Authority of India (NHAI)
  • b) Rural Electrification Corporation Ltd. (REC)