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Under Section 54 of the Income Tax Act, any long term capital investment from the sale of a residential property is exempted if that amount is reinvested in: 1.Purchase of another Residential Property within 1 year before or 2 years after the due date of the sale and/or 2.Construction of Residential house Property within a period of 3 years from the date of acquisition In the 2014 Budget, this section was amended. From the financial year 2014-2015, the reinvestment should be done in ONE Residential House situated in India. However, it is important to note that the new property should not transferred within 3 years from the date of acquisition. Moreover, that year’s Income Tax Return should be submitted in the relevant assessment year on or before the due date. Hence, you will have to reinvest within the date of furnishing of the income tax return otherwise, your capital gain would become taxable. You could use the Capital Gains Account Scheme. The amount of capital gain which you do not reinvest before filing your IT Return can be deposited under the Capital Gains Account Scheme, and attach the proof of this deposit in your IT Return. But, if you do not use the deposited amount within the required time, then it will not be exempted and will be counted as long term capital gain of that financial year. For more on the Capital Gains Account Scheme, take a look at http://www.charteredclub.com/capital-gains-account-scheme/. Long term Capital can be also claimed as exempt in case the gains are invested in bonds of National Highways Authority of India and Rural Electrification Corporation within six months from the date of transfer. However, the exemption is limited to Rs 50 lakh in such a case. It has been recently clarified in the Finance Act 2014 that the limit of Rs 50 lakh is in aggregate and applies to total investment. The exemption up to Rs 50 lakh can be claimed only in one financial year, even if the specified period of six months covers two financial years. (Section 54 EC of the Income Tax Act) Sources: a. Income Tax Act, 1961 (As amended by Finance Act, 2014) b. http://www.charteredclub.com/ c. Business Today (http://businesstoday.intoday.in/story/options-that-can-help-exemption-from-taxes-on-capital-gains/1/209776.html)
Ashwini Tallur, i am agree with your answer but i request to Mr. Ashwini, please give more examples. Thanks SAG Infotech Taxation Software Company
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