Capital Gains : Deduction and Exemption

Income or gain arises on transfer of capital assets is taxable under the head capital gains. but before computing tax on capital gains, we are allowed to claim capital gain deductions under section 54. We are also listing some useful exemptions and allowance which may be beneficial while transferring capital assets.   

                  List of Capital Gain Deductions and Exemptions

Sections		Conditions	Quantum	Eligibility
48(i)		Expenditure incurred wholly and exclusively in connection with transfer of capital asset	Full Amount	All assessees
48(ii)		Cost of acquisition of capital asset and of any improvement thereto (indexed cost of acquisition and indexed cost of improvement, in case of long-term capital assets)	Full Amount	All assessees
54		Long-term capital gains on sale of residential house and land appurtenant thereto invested in purchase of another residential house (within 1 year before or 2 years after the date of transfer)/construction(within 3 years after the date of transfer)	Actual amount invested or capital gain whichever is less.	Individual/HUF
54B		Capital gains on transfer of land used for agricultural purposes(in 2 preceding year), by an individual or his parents or a HUF, invested in other land for agricultural purposes (within 2 years after the date of  transfer)	Actual amount invested or capital gain whichever is less.	Individual/HUF
54D		Capital gains on compulsory acquisition of land or building forming part of an industrial undertaking(in 2 preceding years)  invested in purchase/construction of other land/building for shifting/re-establishing said undertaking or setting up new industrial undertaking (within 3  years after the date of transfer)	Actual amount invested or capital gain whichever is less.	Any assessee
54EA		Net consideration on transfer of long-term capital asset made before 1-4-2000 invested in specified bonds, debentures, shares of a public comp-any or units of notified mutual funds (subject to certain conditions and limits)	Specified Amount	Any assessee
54EB		Long-term capital gains on transfer of any long-term capital asset made be-fore 1-4-2000 invested in specified long-term assets (subject to certain conditions and limits)	Specified Amount	Any assessee
54EC		Long-term capital gains invested (within 6 months after the date of transfer) in long-term specified asset (Bond issued by NHAI , RECL) (bond redeemable after 3 years)	Actual amt invested(max Rs.50 lakhs) or capital gain whichever is less.	Any assessee
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54ED		Long-term capital gains on transfer before 1-4-2006 of certain listed securities or units invested in equity shares forming part of an eligible issue of capital (subject to certain conditions and limits)	Specified Amount	Any assessee
54EE		Long-term capital gain invested in long-term specified assets being units of such fund as may be notified by Central Government to finance start-ups	Specified Amount	All assesses.
54F		Net consideration on transfer of long-term capital asset other than residential house invested in residential house (within 1 year before or 2 years after the date of transfer)/(construction within 3 years after the date of transfer) Should have Only one residential house at the date of transfer and should not purchase(within 2 years from the  date of transfer) or construct(within 3 years from the date of transfer)  any residential house except new asset.	If  the Cost of new residential house > net consideration, entire capital gain is exempt, otherwise , LTCG x Cost of new House/net consideration.	Individual/HUF
54G		Capital gain on transfer of machinery, plant, land or building used for the purposes of the business of an industrial undertaking situate in an urban area (transfer being effected for shifting the undertaking to a non-urban area) invested(within 1 year before or 3 years after  the  date of transfer)  in new machinery, plant, building or land, in the said non-urban area, expenses on shifting, etc.	Cost of new assets + expenses incurred  or capital gains whichever is less.	Any assessee.
54GA		Exemption of capital gains on transfer of machinery, plant, land or building used for the purposes of the business of an industrial undertaking situate in an urban area (in cases of shifting of industrial undertaking from urban area to any Special Economic Zone, invested(within 1 year before or 3 years after  the  date of transfer)  in new machinery, plant, building or land, in SEZ.	Cost of new assets + expenses incurred  or capital gains whichever is less.	All assessees.
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54GB		Exemption in respect of capital gain arising from the transfer of a long-term capital asset, being a residential property (a house or a plot of land), owned by the eligible assessee, and such assessee before the due date of furnishing of return of income under sub-section (1) of section 139 , utilises the net consideration for subscription in the equity shares of an eligible company and such company has, within one year from the date of subscription in equity shares by the assessee, utilised this amount for purchase of specified new asset (subject to certain conditions and limits).   w.e.f. April 1, 2017, eligible start-up is also included in definition of eligible company.	If  the Cost of new plant and machinery  > net consideration of residential house, entire capital gain is exempt, otherwise , LTCG x Cost of new Plant & machinery/net consideration.	Individual/HUF.
CAPITAL GAIN ACCOUNT SCHEME (CGAS) :  Under Sections  54, 54B, 54D, 54F, 54G and 54GA, the assessee is given opportunity to invest such gains / net consideration price in specified assets within the specified time in order to claim exemption. Assessee will have to take a decision for investment in  specified assets till the date of furnishing of the income tax return otherwise, the capital gain would become taxable. Amount of Capital Gain/net consideration which is not utilised by the Assessee has to be deposited under the Capital Gains Account Scheme, before the Due Date of furnishing the Return. Deposits in CGAS should be made before filling Income tax return or before due date of filling Income tax return, whichever is earlier. If amount deposited in CGAS is not utilized within the specified time of 2 years /3 years then the unutilized amount shall be charged as capital gain of the previous year in which the  specified time expires.
10(37)		Capital gains on transfer of urban land which is used for agricultural purposes in 2 preceding years by an individual or his parents or HUF. Transfer is by way of compulsory acquisition, income arisen on or after 1-4-2004. Note:It  includes the compensation or consideration enhanced or further enhanced by any court, Tribunal or other authority.		Individual/HUF
10(38)	Long term capital gain on transfer of assets being  an equity share in a company. Or a unit of an equity oriented fund, sold through recognized stock exchange.			All assessees

 

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