Capital Gains – Section 54 & Section 54F

I discovered one such problem worth going over about claiming an exemption u/s 54 vis a vis 54 F & how both the sections got dramatically impacted by area 50 C. Now you can scroll down below and examine total details regarding Capital Gains– Area 54 & Section 54 F

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Capital Gains– Area 54 & Area 54 F

Let us take a look at the Appropriate sections of the Indian I.T. Act, 1961:

Section 50 C:

If a home is moved for a factor to consider lower than the worth examined by the Stamp Evaluation Authority, then such examined worth will be deemed to be the Full Value Consideration for calculating Capital Gains U/s 48.

Yeah, we all know this, however it is not as simple as you think! Now we concern some bigger difficulties of our method! As far as exemption from Long Term Capital Gains (LTCG) is concerned,

  • u/s Area 54: The amount of LTCG is relevant.
  • u/s Section 54 F: The amount of Net Sale Factor To Consider matters.

The applicability for exemption under any specific case relies on the topic of transfer. If it is a property House Home, exemption u/s 54 could be available, while if it is aside from a Residential Home, exemption u/s 54 F could be taken pleasure in!

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Let us have a look at a theoretical case with theoretical figures.

If you offer a property (might be rented, contested or clear) for say Rs. 35 Lacs while its assessment by the Stamp Valuation Authority is Rs. 65 Lacs and your indexed cost of acquisition is Rs. 25 Lacs.

Then, by virtue of Area 50 C, Full Value Factor to consider u/s 48 will be considered to be Rs. Therefore, U/s 48,

LTCG = Rs.

If it is a Residential Property, then you can declare exemption U/s 54 by investing the amount of Capital Gains, i.e. Rs. 40 Lacs in the new Home Residential or commercial property though the actual Sale Factor to consider got is Rs. 35 Lacs i.e. Financial investment needed is more than the quantity of real Sale Factor to consider received.

If it is a residential or commercial property other than a Residential home, then you require to invest the whole Net Factor To Consider, i.e. Rs. 35 Lacs in the new property within the specified time U/s 54 F. So, we can say, the total up to be invested for the purpose of claiming an exemption u/s 54 F is the amount of real Sale Consideration received & NOT DEEMED FULL VALUE CONSIDERATION as adopted by virtue of section 50 C.

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Isn’t it fascinating to note that section 50 C refers only to section 48 for deeming the Amount Consideration & not to area 54 F[(Mrs.  Nila V. Shah v/s. Commissioner of I.T. (Appeals)] Deeming arrangements need really stringent analyses and the Net Consideration for the function of area 54 F would mean the actual Sale Factor to consider & not any deemed figures !!

By investing the amount for the purchase of a Home Home, exemption u/s 54 F might be claimed with a quantity of Rs. 35 Lacs only; whereas a financial investment of Rs. 40 Lacs would be needed for exemption u/s 54 which is even more than the quantity of actual Sale Consideration got! This is the magic of the Act that makes us question how things would end up for each little change that takes place!! Probably, outcome like this would have made Einstein to whisper the above quoted quote!

Hmm. It sounds a bit illogical; and I have actually learnt that whatever’s that’s sensible is not the law!!

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