Information About Deduction Claimed Against Capital Gains of Deduction under 54 during ITR filing

Section 54 of the Income Tax Act, 1961

Section 54 provides tax exemption on long-term capital gains (LTCG) from the sale of a residential property if the gains are reinvested in purchasing or constructing another residential property. Here are the key details about Section 54:

Eligibility:

• Eligible Assessee: Individuals and Hindu Undivided Families (HUFs).
• Asset Sold: A long-term residential property (held for more than 24 months).
• Asset Purchased/Constructed: Another residential property in India.

Conditions:

1. Purchase: The new residential property must be purchased either 1 year before or 2 years after the date of transfer of the original property.
2. Construction: The new residential property must be constructed within 3 years from the date of transfer of the original property.
3. Holding Period: The new property must be held for at least 3 years from the date of purchase or construction.

Amount of Exemption:

• The exemption amount is the lesser of the capital gains amount or the cost of the new residential property.
• If the entire capital gains amount is not utilized for the purchase or construction, the unutilized amount will be taxed as LTCG.

Capital Gains Account Scheme:

• If the capital gains are not fully utilized by the due date of filing the income tax return, the unutilized amount must be deposited in a Capital Gains Account Scheme (CGAS) in a bank.
• The deposited amount must be used within the specified period (2 or 3 years) for the purchase or construction of the new residential property.

How to Claim Deduction Under Section 54 in ITR Filing

Steps to Claim Deduction in ITR:

1. Calculate Capital Gains:
   • Determine the full value of consideration received from the sale of the original property.
   • Deduct expenses incurred exclusively in connection with such transfer.
   • Subtract the indexed cost of acquisition and indexed cost of improvement (if any).
2. Utilize Capital Gains:
   • Purchase or construct a new residential property within the specified time frame.
   • Deposit the unutilized capital gains in CGAS if not utilized by the due date of filing the return.
3. Filing ITR:
   • Select the appropriate ITR form (e.g., ITR-2 for individuals with capital gains).
   • Fill in the details of the original property sold and the new property purchased/constructed under the ‘Capital Gains’ section.
   • Mention the amount of capital gains and the amount claimed as deduction under Section 54.
   • If the entire capital gains amount is not utilized, mention the amount deposited in CGAS.

Example:

Let’s assume you sold a residential property for ₹1,00,00,000 and the indexed cost of acquisition is ₹50,00,000. The long-term capital gain is ₹50,00,000. You purchased a new residential property for ₹60,00,000 within the specified time frame.

• Capital Gains: ₹50,00,000
• Amount Utilized for New Property: ₹50,00,000 (since the purchase amount is more than the capital gains)
• Amount Deposited in CGAS: ₹0 (since the entire capital gains were utilized)

You can claim a deduction of ₹50,00,000 under Section 54, resulting in zero taxable capital gains.

Filing Details in ITR:

1. Schedule CG (Capital Gains):
   • Enter the details of the property sold.
   • Calculate and enter the long-term capital gain.
   • Provide details of the new residential property purchased/constructed.
   • Enter the amount of deduction claimed under Section 54.
2. Schedule CGAS:
   • If applicable, provide details of the amount deposited in the Capital Gains Account Scheme.

Summary:

• Section 54 allows tax exemption on long-term capital gains from the sale of a residential property if reinvested in another residential property.
• Eligibility criteria, conditions, and the amount of exemption should be carefully considered.
• The unutilized amount should be deposited in CGAS if not utilized by the due date of filing the return.
• Proper details must be filled in the ITR form to claim the deduction.