Capital Gain on sale of LTCA not to be charged in case of investment in residential house - (New) Section 86 / (Old) Section 54F

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....the new asset • Entire capital gain becomes exempt. Deposit of Unutilised Net Consideration under Capital Gains Deposit Scheme [ Section 86(2) ] If the net consideration is not fully utilised before filing the return: • The unutilised amount must be deposited in the notified Capital Gains Deposit Scheme (CGDS). • Deposit must be made: • Before filing the return; and • Not later than the due date under Section 263. • Proof of deposit must accompany the return. Deemed Cost of New Asset [ Section 86(3) ] Cost of New Asset = • the amount already utilised for purchasing or constructing the new asset; plus • Amount deposited under Capital Gains Deposit Scheme (CGDS). Taxability of Unutilised Deposited Amount [ Section 86(4) ] Clause (a) - when the deposited amount is not utilised within the prescribed period. The exemption earlier allowed is recomputed. Amount taxable: X−Y Where: • X = Exemption originally claimed. • Y = Exemption that would have been available based on actual utilisation. Difference ....

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.... residential house property New assets to be purchased or constructed One residential house in India i.e. building & land appurtenant there to Time limit The assessee must: • Purchase a residential house: • Within 1 year before the transfer, or • Within 2 years after the transfer; or • Construct a residential house: • Within 3 years after the transfer. New assets should be situated in India [ Leena J. Shah Vs. ACIT 2005 (11) TMI 386 - ITAT Ahmedabad ] Capital Gain Deposit Scheme Available Exemption Computation (a) Full Exemption • if the cost of the new asset is not less than the net consideration in respect of the original asset, Then • Entire Capital Gain is exempt. (b) Proportionate Exemption • if the cost of the new asset is less than the net consideration in respect of the original asset, Then Formula  Exemption = Capital Gain x Amount Invested/Net Sale Consideration Transfer Condition If such New Asset transferred within 3 Years from the date of purchase or construction, then Cost of Acquisition of New As....

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....r purposes of CGAS and exemption calculation Net consideration exceeding Rs.10 crore shall be ignored. from the A.Y. 2024-25 Deemed Cost of New Asset • For exemption purposes Cost of New asset will be  • Cost of New Asset = Already utilised by the assessee for the purchase or construction of the new asset + Amount Deposited in CGAS • Cost of new asset does not exceed the amount of ten crore rupees. Taxability of Unutilised CGAS Deposit If the deposited amount is not utilized within: • 2 years (purchase), or • 3 years (construction), then the excess exemption claimed becomes taxable. Tax Consequence • The unutilized amount is taxed as capital gains in the year when the 3-year period expires. Withdrawal • The assessee can withdraw the remaining balance as per the CGAS rules. Important Circular and Notification  • Investment in a flat allotted under the Self financing Scheme of the Delhi Development Authority is to be treated as construction for capital gains exemption purposes because the allottee obta....

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....ee furnished and established that he alone provided the investment, and subject to the proviso to section 54F(1). [ N. Ram Kumar Versus Assistant Commissioner of Income-tax, Circle-6 (1), Hyderabad 2012 (10) TMI 145 - ITAT Hyderabad ] • Capital gains were reinvested in purchase of a plot (part of agricultural land) and the sale/ purchase deed was not registered. the investment was in agricultural land, which is not a capital asset as per Section 2(14) of the IT Act. The AO also noted that the property had not been transferred to the assessee's name and that no residential house had been constructed within the stipulated three-year period. [ Assistant Commissioner of Income-tax, Circle-2, Ajmer Versus Om Prakash Goyal 2012 (8) TMI 547 - ITAT Jaipur ] • If the house properties situated at Trichy and Bangalore are owned by the assessee's wife then the same cannot be considered as owned by the assessee for disallowing exemption u/s 54F of the Act. [ S. Krishna Kumar Versus Assistant Commissioner of Income-tax, Circle - III 2012 (6) TMI 576 - ITAT Chennai ] • Deduction u/s 54F was claimed by the minor whic....