Indians can save capital gains tax on property sales. The Income Tax Act offers nine sections for tax reduction or zero tax. Sections cover residential, industrial, agricultural land sales. Investment in new properties or bonds provides exemptions. Relocation of industrial units to specific zones also offers tax benefits. Investing in eligible startups can reduce tax burden.
ET OnlineSold your property? These 9 Sections in Income Tax Act can help save capital gains tax (representative image)
You can save a significant amount of capital gains tax and even at times pay zero tax when selling any house property- both be it industrial and residential or any kind of land, both agricultural and non-agricultural. There are nine sections under the Income Tax Act, 1961 that let you pay either zero or reduce capital gains tax when selling certain assets like houses, land, machinery, and more. While it’s true that most individual taxpayers rely on Section 54 and 54F to pay little or no capital gains tax when selling residential house or land, there are other Sections available too.
Keep reading to find out more about how to save on capital gains tax from sale of house or land.
What are the various Sections using which you can save capital gains tax on sale of assets
According to Income Tax Department brochure, here are the Sections:
Section 54: Exemption from the capital gains arising from the transfer of residential house property and investment in new house property.
Section 54B: Exemption from the capital gains arising from transferring land used for agricultural purposes and investing in new agricultural land.
Section 54D: Exemption from the capital gains arising from the compulsory acquisition of land and building, forming part of the industrial undertaking and investing in land or building for setting up or shifting of the industrial undertaking.
Section 54EC: Exemption from the capital gains arising from the transfer of land or building or both and investing in specified bonds
Section 54EE: Exemption from the capital gains arising from the transfer of any long-term capital asset and investing in specified assets
Section 54F: Exemption from the capital gains arising from the transfer of a long-term capital asset other than a house property and investing in a residential house property
Section 54G: Exemption from the capital gains arising from the transfer of assets on shifting of industrial undertaking from the urban area to a non-urban area.
Section 54GA: Exemption from the capital gains arising from the transfer of assets on shifting of industrial undertaking from the urban area to any SEZ
Section 54GB: Exemption from the capital gains arising from the transfer of residential property and investing in eligible companies or eligible start-ups.
Table showing the various exemptions under Section 54EE, 54G and 54GB available for capital gains tax exemption
Particulars
Section 54EE
Section 54G
Section 54GB
Eligible Assessee
Any assessee
Any assessee
Individuals and Hindu Undivided Family (HUF)
Qualifying Asset
Any capital asset
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 a plot of land)
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)
Investment in new property
Units of notified fund
New plant or machinery purchase or construct a building or shift the original asset to a non-urban area.
Equity shares of an eligible company or eligible start-up. However, the eligible company must buy a new asset within one 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 lakh
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 (CGAS)
Amount of capital gains.
Time limit for making investment in new property
Within six months of the transfer of the long term capital asset
Within one year before or three years after the date of transfer
Before the due date of ITR filing
Time limit to deposit in capital gains account scheme (CGAS)
-
On or before the due date of ITR filing
-
Withdrawal of the tax exemption
Transfer of new asset within 3 years or
Conversion of bonds within 5 years
Amount deposited in CGAS not utilised in the prescribed time
Transfer of new asset within three years
Share of eligible company sold by the assessee
New asset sold by the eligible company,
Amount deposited in CGAS not utilised in the prescribed time
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