Tax-Free Capital Gains: Reinvest in Specified Funds Under Section 54EE, Follow Rules to Avoid Tax Triggers

Section 54EE of the Income Tax Act provides that capital gains from the transfer of a long-term capital asset are exempt from tax if reinvested in units of a specified fund within six months. The exemption applies if the investment cost equals or exceeds the capital gain. If the investment is less, only a proportional exemption is granted. The total investment must not exceed 50 lakh per financial year. If the specified asset is transferred within three years, the exempted gain becomes taxable. Taking a loan against the specified asset is considered a transfer, triggering tax implications.