Exemption Of Long-Term Capital Gains Regarding Any Capital Asset
On Investment In A Residential House
Another income tax exemption which can be enjoyed by an investor on investment in residential house property can be secured under Section 54F.
Thus, where an investor has a long-term
capital gain on the transfer of any capital asset (other than a residential
house) like shares, a plot of land, commercial assets, commercial house
property, jewdllery, etc., then he can secure complete income tax exemption on
the long-term capital gain in respect of the sale of the capital asset if the
entire net sale proceeds thereof are invested in the acquisition of a
residential house or a part either by purchase or construction.
Thus, the entire net sale proceeds should
be invested within 1 Year of the transfer in advance or within 2
years from the date of transfer in the purchase of a residential house
property or the sale proceeds may be invested within 3 years in the
construction of a residential house property.
However, there is one more condition, which
is very important and which must be ensured by every taxpayer. This benefit of
exemption is available only where the taxpayer does not own any residential
house as on the date of the transfer of the capital asset.
The Finance Act, 2000 had, from AY
2001-2002, removed one condition for the operation of the exemption under
Section 54F. Thus, if an assessee owns not more than one residential house, on
the date of transfer of the original asset, he would be eligible to the
exemption under Section 54F.
Further, such a person should not buy
within 1 year any other residential house or a flat or should not construct
within 3 years any residential house from the date of transfer of the
original capital asset.
Further, the lock-in period for the new
residential house so acquired is 3 years. Thus, the newly acquired house
should not be so sold or transferred within a period of 3 years, otherwise the
entire capital gain becomes taxable.