How to claim exemptions on Capital Gains

Exemptions on Capital Gains


Any form of income attracts taxes. People own Capital assets for a long term so than they can gain profit on the appreciated value of the capital. But the income earned by selling these assets is taxable according to the Income Tax Act, 1961. However there are some ways to counter these taxes. There are some exemptions under Section 54 and 54F under which capital gains can be saved.

 The exemptions under section 54 and 54F can be claimed under the following conditions:-

  • This exemption is allowed only to an individual or a HUF.
  • The exemption is allowed only if a new property is bought one year before or within two years after selling the property.
  • If the new residential property is under construction, It should be completed within 3 years of selling the property.
  • Only one residential property can be exempted.
  • The property should be a long term capital asset.
  • The exemption is available on residential property in India only.
  • If the new property is sold within 3 years of its purchase, the exemption is reversed.

Unique features of Section 54:-

  • The entire capital gain has to be invested to claim full exemption under this section.
  • If the entire capital gain is not invested, the amount not invested is taxable.

Unique features of Section 54F:-

  • The entire sales receipt has to be invested to claim full exemption under this section.
  • If the entire sales receipt is not invested, the exemption is allowed proportionately.
  • At the time of the sale of the property, the person should not own, more than one property.
  • If another house is purchased within 2 years of the purchase of the original property, the exemption is reversed.

Related Post: How to pay Income Tax that is due


  • The proportional exemption is allowed for if the cost of the new property is less than the amount received on selling the old property.
  • The new property owned must me in the name of the of the seller.
  • The exemption is allowed if the builder delays to hand over the property to the person within 3 years of purchase.

For any help on ITR Filing feel free to consult the tax experts at Taxraahi. You can file ITR yourself via our ITR software or get CA’s help on filing income tax return. You can also use the option of Business ReturnBulk Return or Revised Return Filing.

By | 2018-08-08T09:05:46+00:00 June 22nd, 2016|Categories: Tax Savings|0 Comments

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