The fresh Funds Act 2023 produced a serious change to Area 54 of the Tax Work, impacting maximum exception to this rule enjoy to have funding gains due to new deals out of land. Here’s how it affects people:

• Prior Code: Till the Work, you will find zero limitation on the level of financing acquire exception you can allege under Part 54 by committing to a separate home.
• The Code: Active throughout the Review Seasons 2024-25 (, onwards), the utmost exclusion allowed significantly less than Section 54 try capped within Rs. ten crore. It means: In case the cost of the new home exceeds Rs. 10 crore, the excess amount spent won’t be thought for different computation. Only the part of the investment acquire to Rs. ten crore purchased brand new possessions is exempt regarding income tax.

Part 54EC of one’s Taxation Work, 1961 lets different out of financial support development tax to your deals away from a house when your progress is actually committed to specific much time-title structure ties contained in this half a year in the time of deals. However, the remaining count will get nonexempt if for example the invested matter was shorter as compared to overall money gain. This is how reinvesting brand new left number influences your own fees:

• The fresh new exception lower than Part 54EC is limited on the amount invested on the specified securities.
• Not in the count dedicated to securities, the brand new left capital gain might be taxed within relevant investment obtain rates (short-term otherwise a lot of time-title, with regards to the holding period).

• The entire unutilized investment get (leftover immediately following committing to ties) could be taxed within appropriate resource gain costs.
• Short-identity investment growth (holding period lower than couple of years) is actually taxed at 31% (also surcharge and cess).
• Long-name financial support gains (carrying period surpassing a couple of years) try taxed on 20% with indexation benefit, efficiently cutting taxable money.

Case study

Mr.Arjun had much time-title capital gains about profit out-of home worth Rs.twenty five lakh. The guy spent Rs.5 lakhs during the specified ties and you will stated a difference of one’s exact same lower than point 54EC.

He had been trying to find more ways to store taxes. The guy consulted an on-line California. This new professional suggested that he can be invest the leftover count to have buying real estate and claim a beneficial deduction towards the leftover number lower than section 54.

What’s the Difference between Section 54 and you may Area 54F?

The income Tax Operate says various income tax exemptions against investment increases one rescue taxation on assessee. Two of the biggest financial support obtain exemptions try mentioned under Section 54 and you will Section 54F. Each other condition exemptions towards the a lot of time-name investment increases. There was a primary difference between the exemptions of the taxation.

Points to Note

• The house or property that is ordered immediately after attempting to sell should be purchased in the latest seller’s label and not in almost any most other title to allege the benefit.
• In the event the cost of the new residential property is leaner than simply the web based marketing proceeds of your original possessions, brand new difference you/s 54F is invited proportionately. One can reinvest this new remaining count around Part 54EC in their explanation this six days of the transfer, at the mercy of most other conditions, to keep tax.

Mr Shekhar ordered home in for Rs 12,forty,000. Financing get developing with the selling of the property amounted so you can Rs dos,00,000. The guy purchased a different sort of residential household set for Rs six,00,000. Can be he claim the main benefit of Point 54 when it comes to the house constructed during the ?

Ans: The assessee bought the brand new home possessions into the chronilogical age of one year through to the import of dated family property, that is twenty-first ; and that, he qualifies to your exception less than Section 54. They can claim the main benefit of part 54 with respect to their newly purchased house inside the .