You can save a significant amount of capital gains
tax and even at times pay zero tax when selling any house property- both be it industrial and residential or any kind of land, both agricultural and non-agricultural. There are nine sections under the Income Tax Act, 1961 that let you pay either zero or reduce capital gains tax when selling certain assets like houses, land, machinery, and more. While it’s true that most individual taxpayers rely on
Section 54 and 54F to pay little or no capital gains tax when selling residential house or land, there are other Sections available too.
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Keep reading to find out more about how to save on capital gains tax from sale of house or land.
What are the various Sections using which you can save capital gains tax on sale of assets
According to Income Tax Department brochure, here are the Sections:
- Section 54: Exemption from the capital gains arising from the transfer of residential house property and investment in new house property.
- Section 54B: Exemption from the capital gains arising from transferring land used for agricultural purposes and investing in new agricultural land.
- Section 54D: Exemption from the capital gains arising from the compulsory acquisition of land and building, forming part of the industrial undertaking and investing in land or building for setting up or shifting of the industrial undertaking.
- Section 54EC: Exemption from the capital gains arising from the transfer of land or building or both and investing in specified bonds
- Section 54EE: Exemption from the capital gains arising from the transfer of any long-term capital asset and investing in specified assets
- Section 54F: Exemption from the capital gains arising from the transfer of a long-term capital asset other than a house property and investing in a residential house property
- Section 54G: Exemption from the capital gains arising from the transfer of assets on shifting of industrial undertaking from the urban area to a non-urban area.
- Section 54GA: Exemption from the capital gains arising from the transfer of assets on shifting of industrial undertaking from the urban area to any SEZ
- Section 54GB: Exemption from the capital gains arising from the transfer of residential property and investing in eligible companies or eligible start-ups.
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Table showing the various exemptions under Section 54 and 54F available for capital gains tax exemption:
| Particulars |
Section 54
|
Section 54F |
| Eligible Assessee |
Individuals and Hindu Undivided Family (HUFs) |
Individuals and Hindu Undivided Family (HUFs) |
| Qualifying Asset |
Residential House Property |
Any Capital Asset other than residential property |
| Nature of Capital Gains |
Long term capital gains (LTCG) |
Long term capital gains (LTCG) |
| Investment in new property |
Residential house property in India |
Residential house property located in India |
| Maximum amount of exemption allowed |
Lower of
- Amount of long term capital gains or
- Amount invested in new property and deposited in capital gain account scheme.
|
If net consideration is invested in new house property the entire capital gain will be exempted from taxation.
If partial consideration is invested in new house property the exemption will be granted in proportion to the amount invested
|
| Time limit for making investment in new property |
Purchase: 1 year before or 2 years after the date of transfer.
Construction: Within three years from the date of transfer.
|
Purchase: 1 year before or 2 years after the date of transfer.
Construction: Within three years from the date of transfer.
|
| Time limit to deposit in capital gains account scheme (CGAS) |
On or before the due date of filing the ITR |
On or before the due date of filing the ITR |
| Withdrawal of the tax exemption |
Amount deposited in CGAS not utilised in the prescribed time;
Transfer of new house within three years
|
Amount deposited in CGAS not utilised in the prescribed time;
Transfer of new house within three years
|
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Table showing the various exemptions under Section 54B, 54D and 54EC available for capital gains tax exemption
| Particulars |
Section 54B |
Section 54D |
Section 54EC |
| Eligible Assessee |
Individuals and Hindu Undivided Family (HUFs) |
Any assessee |
Any assessee |
| Qualifying Asset |
Agricultural land |
Land or building forming part of an industrial undertaking transferred by way of compulsory acquisition. |
Land or building or both. |
| Nature of Capital Gains |
Long or short term capital gains (LTCG/STCG) |
Long or short term capital gains (LTCG/STCG) |
Long term capital gains (LTCG) |
| Investment in new property |
Agricultural land |
Land or building for the purposes of shifting or re-establishing the undertaking or setting up another industrial undertaking |
National Highway Authorities of India (NHAI) Bonds
Rural Electrification Corporation of India (REC)
Any other bonds notified by the Central Government.
|
| Maximum amount of exemption allowed |
Lower of:
- Amount of capital gains or
- Amount invested in new agricultural land including the amount deposited in Capital Gains Account Scheme
|
Lower of:
- Amount of capital gains or
- Amount invested in new land or building including the amount deposited in Capital Gains Account Scheme
|
|
| Time limit for making investment in new property |
Within two years after the date of transfer of original asset |
Within a period of three years after the date of compulsory acquisition |
Within six months of the transfer of the land, building or both. |
| Time limit to deposit in capital gains account scheme (CGAS) |
On or before the due date of filing the ITR |
On or before the due date of filing the ITR |
On or before the due date of filing the ITR |
| Withdrawal of the tax exemption |
- Amount deposited in CGAS not utilised in the prescribed time
- Transfer of new agricultural land within three years
|
- Amount deposited in CGAS not utilised in the prescribed time;
- Transfer of new land or building within three years
|
Transfer of bonds within five years or
Conversion of bonds within five years
|
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Table showing the various exemptions under Section 54EE, 54G and 54GB available for capital gains tax exemption
| Particulars |
Section 54EE |
Section 54G |
Section 54GB |
| Eligible Assessee |
Any assessee |
Any assessee |
Individuals and Hindu Undivided Family (HUF) |
| Qualifying Asset |
Any capital asset |
Plant, machinery, land or building or any right in land or building used for the purpose of an industrial undertaking situated in an urban area |
Residential property (i.e. a house or a plot of land) |
| Nature of Capital Gains |
Long term capital gains (LTCG) |
Long or short term capital gains (LTCG/STCG) |
Long or short term capital gains (LTCG/STCG) |
| Investment in new property |
Units of notified fund |
New plant or machinery purchase or construct a building or shift the original asset to a non-urban area. |
Equity shares of an eligible company or eligible start-up. However, the eligible company must buy a new asset within one year after the date of subscription of shares. |
| Maximum amount of exemption allowed |
Lower of:
- Amount of long term capital gains
- Amount invested in specified assets or
- Rs 50 lakh
|
Lower of:
- Amount of capital gains, or
- Aggregate of amount invested in new assets, expenses on transfer or establishment and amount deposited in capital gain account scheme (CGAS)
|
Amount of capital gains. |
| Time limit for making investment in new property |
Within six months of the transfer of the long term capital asset |
Within one year before or three years after the date of transfer |
Before the due date of ITR filing |
| Time limit to deposit in capital gains account scheme (CGAS) |
– |
On or before the due date of ITR filing |
– |
| Withdrawal of the tax exemption |
- Transfer of new asset within 3 years or
- Conversion of bonds within 5 years
|
- Amount deposited in CGAS not utilised in the prescribed time
- Transfer of new asset within three years
|
- Share of eligible company sold by the assessee
- New asset sold by the eligible company,
- Amount deposited in CGAS not utilised in the prescribed time
|
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