Income TaxCapital Gains Fine Prints of Reinvestment Section 54

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The Tax Publishers Income Tax-Capital Gains Fine Prints of Reinvestment Section 54 Srivatsan Ranganathan The author has discussed some salient points and fine prints of the reinvestment benefit under Section 54 in this write up. Section 54 is an incentivizing provision as it grants tax benefits for purchase or construction of two residential immovable properties by granting tax deduction from long term capital gains that has risen by way of transfer of residential properties. Some fine prints of this section are discussed herein. There are a number of conditions attached to avail this Section (i) Benefit of this section will not be available for gains arising out of short term transfer of residential property. (ii) The Long term Capital gains should have arisen from residential property which is taxable under Income from house property. The law uses the phrase taxable under Income from house property and it does not necessarily mean that the house property needs to suffer tax or has to have a taxable income/tax payment under income from house property. Thus transfer of self occupied residential property will also qualify for this deduction/relief. If we recollect the annual value of two self-occupied residential property at the option of the assessee (if he/she owns more than two residential self-occupied properties) will be taken as NIL as per Section 23. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Income Tax-Capital Gains

Fine Prints of Reinvestment Section 54

Srivatsan Ranganathan

The author has discussed some salient points and fine prints of the reinvestment benefit under Section 54 in this write up.

Section 54 is an incentivizing provision as it grants tax benefits for purchase or construction of two residential immovable properties by granting tax deduction from long term capital gains that has risen by way of transfer of residential properties. Some fine prints of this section are discussed herein.

There are a number of conditions attached to avail this Section

(i) Benefit of this section will not be available for gains arising out of short term transfer of residential property.

(ii) The Long term Capital gains should have arisen from residential property which is taxable under Income from house property. The law uses the phrase taxable under Income from house property and it does not necessarily mean that the house property needs to suffer tax or has to have a taxable income/tax payment under income from house property. Thus transfer of self occupied residential property will also qualify for this deduction/relief. If we recollect the annual value of two self-occupied residential property at the option of the assessee (if he/she owns more than two residential self-occupied properties) will be taken as NIL as per Section 23.