BIG RELIEF IN TAX ON LONG TERM CAPITAL GAIN ON SALE OF HOUSE PROPERTY || LEARN INCOME TAX || A brief discussion about amendment made in section 54.
Section 54: Exemption on Sale of House Property on Purchase of Another House Property
Budget 2019 announcement!
Capital gains exemption under Section 54: Assessees can get an exemption from long term capital gains from the sale of house property by investing in up to two house properties against the earlier provision of one house property with same conditions. However, the capital gains on the sale of house property must not exceed Rs 2 crores.
The exemption under section 54 is available when the capital gains from the sale of house property are reinvested into buying or constructing two other house properties (prior to Budget 2019, the exemption of the capital gains was limited to only 1 house property). The exemption on two house properties will be allowed once in the lifetime of a taxpayer, provided the capital gains do not exceed Rs. 2 crores. The taxpayer has to invest the amount of capital gains and not the entire sale proceeds. If the purchase price of the new property is higher than the amount of capital gains, the exemption shall be limited to the total capital gain on sale.
Conditions for availing this benefit
1. The new property can be purchased either 1 year before the sale or 2 years after the sale of the property.
2. The gains can also be invested in the construction of a property, but construction must be completed within three years from the date of sale.
3. In the Budget for 2014-15, it has been clarified that only 1 house property can be purchased or constructed from the capital gains to claim this exemption.
4. Please note that this exemption can be taken back if this new property is sold within 3 years of its purchase/completion of construction.
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