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Property Plus — Chennai

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Sections 54 and 54F - a comparison


THERE are many similarities as well as differences between Section 54 and Section 54 F of the Income Tax Act 1956. This is why a comparison between the two sections is useful. In the earlier issues, we had seen the comparison by way of examples.

Now, we will look at it in a tabular format :

No.ParticularsSection 54Section 54F
1.Asset transferredResidential House


Transfer of a long term capital Asset not being a residential house
2.Type of Capital gain to claim exemptionLong term
3.In what asset should the investment be madeResidential House Property
4.How to investPurchase or construction
5.Time limit for construction3 years from the date of transfer
6.Time limit for purchase1 year before transfer or 2 years after transfer
7.Amount of exemptionAmount of investment.Amount of investment * Capital gains

Net consideration

8.Under which situation there will be no tax on capital gainWhen the invesment is equal or great than the amount of capital gainWhen the investment is equal or greater than the amount of Net consideration
9.If the amount is not invested before the date

of filing return, what should be done?

Deposit in a Capital Gain Deposit Scheme in any specified Bank and enclose the proof of such

deposit with the return of income. (See Note 1)

10.What is the consequence if the full deposit is not utilised?The amount will be taxable in the year of default. (Either if there is withdrawal and the amount is not utilized or at the end of three years of transfer and there is no purchase or construction)
11.Can the person hold any other house property on the date of transfer other than the

exempted asset (due to purchase one year before the date of transfer)?

Yes. The person can hold any number of house property on the date of transfer.No. The person can hold only one house property other than the new exempted asset, otherwise he cannot claim exemption u/s 54F
12.Can the person purchase a new house property within 1 year from the date of transfer or constructs a new house property from 3 years from date of transfer other than the exempted asset?YesNo. If he does so, he will lose the exemption and he will be taxed in the year in which new asset is purchased

or constructed for the exempted amount as long term capital gain.

13.What is the consequence if the exempted house property is transferred within

three years of acquisition?

The amount of capital gain exempted from tax on the original asset will be reduced from the cost of acquisition of the new assetThe amount of capital gain which is claimed exempted will be taxed as such

in the year in which transfer takes place.

14.Nature of capital gain in case of the above default.Short term Capital gainLong term Capital gain.

Note: The unutilised deposit amount under the Capital Gains Account Scheme, 1988, in the case of an individual who dies before the expiry of the stipulated period cannot be taxed in the hands of the deceased. This amount is not taxable in the hands of legal heirs also, as the unutilised portion of the deposit does not partake the character of income in their hands but is only a part of the estate devolving upon them — Circular No. 743, dated 6-5-1996.

This issue along with the discussions on Section 54 & 54F in the last two issues, will give a comprehensive understanding of these two sections, their similarities and differences.

(The author is Partner, T.M. Aaditiyaa & Co, Chartered Accountants, Chennai.)

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