Various Income Tax exemptions available in respect of Capital Gains

Summary: The Income Tax Act provides various exemptions on capital gains for different scenarios. Section 54 grants exemptions for individuals and HUFs on the sale of residential property, provided the proceeds are reinvested in another residential house within specified time limits. Section 54B allows exemptions for agricultural land sold by individuals or HUFs, subject to reinvestment in new agricultural land. Sections 54D, 54G, and 54GA apply to any assessee and cover compulsory acquisition or relocation of industrial land and buildings, with reinvestment requirements in new assets. Section 54EC offers exemptions to any assessee for long-term capital gains if invested in specified bonds, with a limit of ₹50 lakh. Section 54EE allows investment in units of notified funds with similar conditions. Section 54F applies to individuals and HUFs for the sale of any capital asset other than a residential house, with reinvestment in a new residential property. Section 54GB offers exemptions for investments in eligible companies or startups, with conditions on asset acquisition. Each section has specific time limits for reinvestment and the requirement to deposit funds in the Capital Gains Account Scheme (CGAS), failing which the exemptions may be withdrawn.
This document entails the different type of exemption available to an assessee with respect to sale of a capital asset. The document contains the detials about the type of capital asset, capital gains and type of new asset in which the amount needs to be reinvested.​
Various exemptions available in respect of Capital Gains

Particulars
Section 54
Section 54B
Section 54D
Section 54EC

Eligible Assessee
Individuals and Hindu Undivided Family (HUFs)
Individuals and Hindu Undivided Family (HUFs)
Any assessee
Any assessee

Qualifying Asset
Residential House Property
Agricultural land
Land or building forming part of an Industrial undertaking transferred by way of compulsory acquisition
Land or building or both

Nature of Capital Gains
Long Term Capital Gains (LTCG)
Long or Short Term Capital Gains (LTCG/STCG)
Long or Short Term Capital Gains (LTCG/STCG)
Long Term Capital Gains (LTCG)

Investment in new Property
Residential House Property in India
Agricultural land
Land or building for the purposes of shifting or re-establishing the undertaking or setting up another industrial undertaking
 
•  National Highway Authority of India (NHAI Bonds)
•  Rural Electrification Corporation Limited (REC Bonds)
•  Any other bond notified by the Central Government
 

Maximum amount of exemption allowed
lower of:
♦ Amount of long-term capital gains or
♦ Amount invested in new house property and deposited in capital gain account scheme
[Note 1]
lower of:
♦ Amount of capital gains; or
♦ Amount of investment in new agricultural land[including the amount deposited in Capital Gains Account Scheme]
lower of:
♦ Amount of capital gains; or
♦ Amount of investment in new land or building [including the amount deposited in Capital Gains Account Scheme]
 
 
lower of:
♦ The amount of long-term capital gains; or
♦ The amount invested in specified bonds; or
♦ Rs. 50,00,000

Time Limit for making investment in new Property
♦ Purchase: 1 year before or 2 years after the date of transfer
♦ Construction: within 3 years from the date of transfer
within 2 years after the date of transfer of original asset
within a period of 3 years after the date of compulsory acquisition
within 6 months of the transfer of the land, building, or both

Time limit to deposit in Capital Gains Account Scheme (CGAS)
On or before the due date of filing the return of income
On or before the due date of filing the return of income
On or before the due date of filing the return of income
–

Withdrawal of Exemption
Amount deposited in CGAS not utilised in the prescribed time;
Transfer of new house within 3 years
♦ Amount deposited in CGAS not utilised in the prescribed time;
♦ Transfer of new agricultural land within 3 years
♦ Amount deposited in CGAS not utilised in the prescribed time;
♦ Transfer of new land or building within 3 Years
♦ Transfer of bonds within 5 years; or
♦ Conversion of bonds within 5 Years

–

Particulars
Section 54EE
Section 54F
Section 54G
Section 54GA
Section 54GB

Eligible Assessee
Any assessee
Individuals and Hindu Undivided Family (HUFs)
Any assessee
Any assessee
Individuals and Hindu Undivided Family (HUFs)

Qualifying Asset
Any Capital Asset
Any Capital Asset other than residential house property
Plant, machinery, land, or building, or any right in land or building used for the purpose of an industrial undertaking situated in an urban area
Plant, machinery, land, or building, or any right in land or building used for the purpose of an industrial undertaking situated in an urban area
Residential property (i.e. a house or plot of land)

Nature of Capital Gains
♦ Long Term Capital Gains (LTCG)
Long Term Capital Gains (LTCG)
Long or Short Term Capital Gains (LTCG / STCG)
Long or Short Term Capital Gains (LTCG / STCG)
Long Term Capital Gains (LTCG)

Investment in new Property
Units of Notified Fund
Residential house property located in India
New plant or machinery, purchase or construct a building, shift the original asset in to a non-urban area
New plant or machinery, purchase or construct a building, shift the original asset in SEZ
equity shares of an ‘eligible company’ or ‘eligible start-up’
 
However, the eligible company buy new asset within 1 year after the date of subscription of shares.

Maximum amount of exemption allowed
lower of:
♦ Amount of long-term capital gains;
♦ Amount invested in specified assets; or
♦ Rs. 50,00,000
 
If net consideration is invested in new house property – the entire capital gain will be exempt from taxation.
If partial consideration is invested in new house property – the exemption will be granted in proportion to the amount invested.
[Note 1]
lower of:
♦ Amount of capital gains; or
♦ Aggregate of amount invested in new assets, expenses on transfer or establishment and amount deposited in capital gain account scheme
lower of:
♦ Amount of capital gains; or
♦ Aggregate of amount invested in new assets, expenses on transfer or establishment and amount deposited in deposit scheme
Amount of capital gain

Time Limit for making investment in new Property
within 6 months of the transfer of the long term capital asset
♦ Purchase: 1 year before or 2 years after the date of transfer
♦ Construction: within 3 years from the date of transfer
within 1 year before or 3 years after the date of transfer
within 1 year before or 3 years after the date of transfer
Before the due date for furnishing of income-tax return.

Time limit to deposit in Capital Gains Account Scheme (CGAS)
–
On or before the due date of filing the return of income
On or before the due date of filing the return of income
On or before the due date of filing the return of income
–

Withdrawal of Exemption
♦ Transfer of new asset within 3 years; or
♦ Conversion of bonds into money within 3 Years
♦ Acquisition of Second House;
♦ Amount deposited in CGAS not utilised in the prescribed time;
♦ Transfer of new house within 3 Years
♦ Amount deposited in CGAS not utilised in the prescribed time;
♦ Transfer of new asset within 3 years
♦ Amount deposited in CGAS not utilised in the prescribed time;
♦ Transfer of new asset within 3 years
♦ Shares of the eligible company sold by the assessee;
♦ New Asset sold by the eligible company;
♦ Amount deposited by eligible company in CGAS not utilised in the prescribed time;

Note 1: Cost of new assetcannot exceed Rs. 10 crore. Further, if no investment is made by assessee in new asset and sum is deposited in capital gain account scheme, the maximum amount shall be taken into consideration is Rs. 10 crore for the purpose of exemption. (Applicable from Assessment Year 2024-25).
[As amended by Finance Act, 2024]