Capital Gains: Exemption against Residential Property Sales and Reinvestment Incentives in Clause 82 of the Income Tax Bill, 2025 vs. Section 54 of the Income Tax Act, 1961

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..... , thereby stimulating the real estate sector and providing tax relief to individuals and Hindu Undivided Families (HUFs). The clause modifies the existing provisions related to capital gains taxation, reflecting the evolving economic and policy landscape. Objective and Purpose The legislative intent behind Clause 82 is to promote the reinvestment of capital gains from residential property sales into new residential properties. This clause seeks to provide a tax incentive for taxpayers to reinvest in the housing sector, thus contributing to the growth of the real estate market. The policy considerations include enhancing housing availability, supporting economic development, and offering tax relief to individuals and HUFs who sell resident .....

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..... This subsection deals with scenarios where the deposited amount is not fully utilized within the specified period. It mandates that any unutilized amount is taxable, reinforcing the importance of timely reinvestment. Additionally, it allows the taxpayer to withdraw the unused amount, providing a clear exit mechanism. Subsection (5): This provision introduces flexibility by allowing taxpayers to invest in two residential houses if the capital gains do not exceed two crore rupees. This option is available only once, ensuring that it is not exploited for multiple transactions. This flexibility can benefit taxpayers looking to diversify their real estate investments. Subsection (6): This subsection restricts the exercise of the option to .....

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..... uire reinvestment of capital gains in a new residential property to avail of tax benefits. The provisions aim to encourage investment in the housing sector by deferring or exempting capital gains tax. 2. Timeframe for Reinvestment: Both provisions allow a similar timeframe for reinvestment-one year before or two years after the transfer, or three years for construction. 3. Option to Invest in Two Houses: Both provisions allow the option to invest in two residential properties if the capital gains do not exceed two crore rupees, subject to certain conditions. 4. Cap on Consideration: Both Clause 82 and Section 54 impose a cap on the cost of the new asset and the capital gains considered for tax benefits, ensuring that the provisions ta .....

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