Income Tax - Frequently Asked Questions (FAQs)

FAQs on Capital Gains

Is there any benefit available in respect of re-investment of capital gain in any other capital asset?

Contents

Ans. A taxpayer can claim exemption from certain capital gains by re-investing the amount of capital gain into specified asset. The following table highlights the assets in respect of which the benefit of re-investment is available:

*Section under which benefit is available*	*Eligible Assessee*	*Gain eligible for claiming exemption*	*Asset in which the capital gain is to be re-invested to claim exemption*
Section 54	Individual/HUF	Long-term capital gain arising on transfer of residential house property.	Gain to be re-invested in purchase or construction of one residential house property in India. However, an assessee can make investment in two residential house property in India. The option of making investment in two residential house is available only if the amount of long-term capital gain doesn't exceed Rs. 2 crore. Further, the benefit of making investment in two residential houses can be availed once in a lifetime. Further, if the cost of new asset exceeds Rs. 10 crore, the excess amount shall be ignored and Rs. 10 crore shall be taken into consideration.
section 54B	Individual/HUF	Long-term or short-term capital gain arising on transfer of agricultural land which was used by individual or his parents or HUF for agriculture purposes for at least 2 years immediately prior to transfer.	Gain to be re-invested in purchase of agricultural land (may be in rural arear or urban area).
section 54EC	Any person	Long term capital gain arising on transfer of land or building or both .	Gain to be re-invested in purchase of bonds specified under section 54EC.
Section 54EE	Any person	Long-term capital gain arising on transfer of any capital asset.	Gain to be re-invested in long-term specified assets to be notified by the Central Government to finance start-ups.
section 54F	Individual/HUF	Long-term capital gain arising on transfer of any capital asset other than residential house property, provided on the date of transfer the taxpayer does not more than one residential house property from the assessment year 2001-02 (except new house property)	Net sale consideration to be re-invested in purchase or construction of only one residential house property in India. Note: if the cost of new asset exceeds Rs. 10 crore, the excess amount shall be ignored and Rs. 10 crore shall be taken into consideration.
section 54D	Any person	Long-term or Short-term capital gain arising on transfer of land or building forming part of an industrial undertaking which is compulsorily acquired by Government and was used for industrial purpose for a period of 2 years prior to its acquisition.	Gain to be re-invested to acquire land or building for industrial purposes.
section 54G	Any person	Long term or Short term capital gain arising on transfer of land, building, plant or machinery in order to shift an industrial undertaking from urban area to rural area.	Gain to be re-invested to acquire land, building, plant or machinery in order to shift an industrial undertaking to a rural area.
section 54GA	Any person	Long term or short term capital gain arising on transfer of land, building, plant or machinery in order to shift an industrial undertaking from urban area to any Special Economic Zone.	Gain to be re-invested to acquire land, building, plant or machinery in order to shift an industrial undertaking to any Special Economic Zone.
section 54GB	Individual/HUF	Long-term capital gain arising on transfer of residential property (a house or a plot of land). The transfer should take place during 1^st April, 2012 and 31^st March 2017. However, in case of investment in "eligible start-up", the residential property can be transferred upto 31^st March 2022.	The net sale consideration should be utilised for subscription in equity shares of an "eligible company". W.e.f. April 1, 2017, eligible start-up is also included in definition of "eligible company" .

In order to claim the exemption on account of re-investment in various situations as discussed above, other conditions specified in the respective sections should also be satisfied and the re-investment should be made within the period specified in the respective sections.