Capital Gain Exemption U/s 54

[puneet virmani]

Mr. Rajinder incurred a Long Term capital gain of Rs.2250000/- from sale of residential property during the Financial Year 2011-2012. He invested Rs.2500000/- in new residential flat with in 4 months of the said Capital Gain i.e in 2011-2012 only and taken exemption U/s 54 of the I.T Act .   NOW as the property newly purchased not suited him for any personal resons, he want's to sell that property for 2500000/- without any gain or loss and purchase new property for Rs.3000000/-. Whether he will be entiltled for exemption U/s 54 of the I.T Act or the exemption will be forfeited.

 

         

AI Summary

Capital Gain Exemption may be withdrawn when a replacement residential property is sold and net cost treated as taxable gain.
When a replacement residential property that had secured a capital gains reinvestment exemption is sold, the prior exemption is withdrawn; the cost of that replacement property is taken net of the exemption and the resulting difference is treated as a short term capital gain, with no further deduction allowed.