Capital Gain Exemption

Capital Gain Tax arises on the sale of Capital Asset by a taxpayer. The Income Tax Act allows a total / partial exemption from Capital Gain under different sections. However, the capital gain exemption amount can not exceed the total amount of capital gain. Following are the most common capital gains exemptions:

A taxpayer can claim the exemption while filing ITR for that particular financial year. An individual taxpayer needs to file ITR 2. And 31st July of the next financial year is the due date to file ITR. However, for FY 19-20 the due date to file ITR is 30th November 2020.

ITR for Gains from Sale of House / Property
CA Assisted Income Tax Return filing for individuals and HUFs having Capital Gains / Loss income from sale of house, property, land, etc.
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ITR for Gains from Sale of House / Property
CA Assisted Income Tax Return filing for individuals and HUFs having Capital Gains / Loss income from sale of house, property, land, etc.
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List of Capital Gain Exemption

The Income Tax Act has defined the particular sections under which exemptions can be claimed on capital gains earned. The intention of the exemption is to allow the taxpayer to invest in a new Capital Asset within a specified time limit without any tax burden.

Section Description Applicability Deduction Amount
54 Sale of House Property (LTCA) by Individual/HUF Purchase/Construction of New House Property. Lower of
Cost of New House Property
OR
Capital Gains
Purchased 1 year before or 2 years after the sale of a property.
Constructed within 3 years from the sale of a property.
54F Sale of Long Term Capital Asset (LTCA) other than house property by Individual/HUF Purchase/Construction of New House Property. Cost of new asset * Capital Gains / Net Consideration
Purchased 1 year before or 2 years after the sale of a property.
Constructed within 3 years from the sale of a property.
54EC Sale of Land or Building or both (LTCA) by any taxpayer Investment in NHAI/REC Bonds.  Lower of
Cost of Investment 
OR
Capital Gains
An investment made within 6 months from the sale of an asset. 
The investment amount can not be more than Rs. 50 lakhs. 
54B Sale of Agricultural Land (LTCA/STCA) by Individual/HUF Purchase of new Agricultural Land.  Lower of
Cost of New Agricultural Land 
OR
Capital Gains
Purchased within 2 years from the sale of land. 
Land sold must be used for agriculture purposes for 2 years prior to sale. 
54D Compulsory acquisition of land and building (LTCA) used in an industrial undertaking Purchase of land or building for shifting or re-establishing the industrial undertaking.  Lower of
Cost of New Asset
OR
Capital Gains
Purchase within 3 years from the date of compulsory acquisition. 
Land/Building acquired must be used for industrial undertaking purposes for 2 years prior to transfer. 
54E, 54EA, 54EB Sale of any LTCA by any taxpayer Investment in Specified Securities.  Cost of new asset * Capital Gains / Net Consideration
Specified securities include Government Securities, Savings Certificates, Units of UTI,  Specified Debentures, etc. 
An investment made within 6 months from the sale of an asset. 
54EE Sale of any LTCA by any taxpayer Investment in units of a specified fund. The investment amount can not be more than Rs. 50 lakhs.  Cost of new asset * Capital Gains / Net Consideration
Specified fund include units notified by the central government 
An investment made within 6 months from the sale of an asset.
54G Sale of plant, machinery, land,  building, or rights to land, building situated in an Urban Area used in the industrial undertaking.   Purchase of new plant, machinery, land, building in Rural Area.  Lower of
Cost of New Asset
OR
Capital Gains
Purchased within 1 year before and 3 years after the sale of assets. 
The asset sold can be LTCA or STCA. 
54GA Sale of plant, machinery, land,  building, or rights to land, building situated in an Urban Area used in the industrial undertaking.   Purchase of new plant, machinery, land, building in SEZ.  Lower of
Cost of New Asset
OR
Capital Gains
Purchased within 1 year before and 3 years after the sale of assets. 
The asset sold can be LTCA or STCA. 

 

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Capital Gains

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FAQs

How to claim exemption if we wish to buy the house property next year?

Taxpayer can claim exemption u/s 54, 54F depending on asset sold. An exemption can be claimed by putting the amount in Capital Gains Account Scheme (CGAS) before the due date of filing of ITR in the year of sale. And claim the same as exemption while filing ITR.

Can we claim exemptions on sale of Short Term Capital Asset(STCA)?

The taxpayer can claim exemption u/s 54B and 54G on Short Term Capital Asset. However, all the other exemptions are available on Lond Term Capital Asset.

What are the documents required as proof of investment while claiming exemption?

While filing ITR, taxpayer only needs to enter the exemption section, required details of purchased asset and amount of exemption claimed. However, it is important to keep the purchased assets documents on record for future use.

Got Questions? Ask Away!

  1. Hey @Tanmay_mehta,

    In Budget 2018, the grandfathering rule was announced u/s 112A which implies that - long term capital gains above INR 1 Lakh will be taxed at 10% after 1st Feb 2018.
    Therefore to calculate LTCG:

    • Take the equity value as on 31st Jan 2018 to be X
    • so LTCG = Sales price - value as on 31st Jan 2018
    • LTCG = 1,80,000 - X

    Any tax on LTCG will be 10% above INR 1 Lakh

    • LTCG below INR 1 Lakh is fully exempt
    • LTCG above INR 1 Lakh will be taxable at 10% for the amount above INR 1 Lakh only.

    Hope this helps!

    Refer to our learn article on LTCG on sale of Equity Shares and Equity Mutual funds

  2. Hi @Yantra_74
    Quarterly Break up of Capital Gains is required while filing ITR 2. You need to enter the Gains in the quarter when you sold the mutual funds and Gains were realized.

  3. Hi @Yantra_74

    You need to get the transaction statement from CAMS where you can get the dates of the transaction done and thus you will get the profit/loss for each quarter (Net gain/Loss) and the total of each quarter should match to total LTCG of the year.

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