Section 54 of Income Tax Act "Profit on sale of property used for residence"
54. (1) Subject to the provisions of sub-section (2),
where, in the case of an assessee being an individual or a
Hindu undivided family, the capital gain arises from the
transfer of a long-term capital asset, being buildings or
lands appurtenant thereto, and being a residential house,
the income of which is chargeable under the head "Income
from house property" (hereafter in this section referred to
as the original asset), and the assessee has within a period
of one year before or two years after the date on which the
transfer took place purchased, or has within a period of
three years after that date constructed, one residential
house in India, then, instead of the capital gain being
charged to income-tax as income of the previous year in
which the transfer took place, it shall be dealt with in
accordance with the following provisions of this section,
that is to say,-
(i) if the amount of the capital gain is greater than the
cost of the residential house so purchased or constructed
(hereafter in this section referred to as the new asset),
the difference between the amount of the capital gain and
the cost of the new asset shall be charged under section 45
as the income of the previous year; and for the purpose of
computing in respect of the new asset any capital gain
arising from its transfer within a period of three years of
its purchase or construction, as the case may be, the cost
shall be nil; or
(ii) if the amount of the capital gain is equal to or
less than the cost of the new asset, the capital gain shall
not be charged under section 45; and for the purpose of
computing in respect of the new asset any capital gain
arising from its transfer within a period of three years of
its purchase or construction, as the case may be, the cost
shall be reduced by the amount of the capital gain:
2[Provided that where the amount of the capital gain does
not exceed two crore rupees, the assessee may, at his
option, purchase or construct two residential houses in
India, and where such option has been exercised,-
(a) the provisions of this sub-section shall have effect as
if for the words "one residential house in India", the words
"two residential houses in India" had been substituted;
(b) any reference in this sub-section and sub-section (2)to
"new asset" shall be construed as a reference to the two
residential houses in India:
Provided further that where during any assessment year, the
assessee has exercised the option referred to in the first
proviso, he shall not be subsequently entitled to exercise
the option for the same or any other assessment year.]
(2) The amount of the capital gain which is not appropriated
by the assessee towards the purchase of the new asset made
within one year before the date on which the transfer of the
original asset took place, or which is not utilised by him
for the purchase or construction of the new asset before the
date of furnishing the return of income under section 139,
shall be deposited by him before furnishing such return
[such deposit being made in any case not later than the due
date applicable in the case of the assessee for furnishing
the return of income under sub-section (1) of section 139]
in an account in any such bank or institution as may be
specified in, and utilised in accordance with, any scheme
which the Central Government may, by notification in the
Official Gazette, frame in this behalf and such return shall
be accompanied by proof of such deposit; and, for the
purposes of sub-section (1), the amount, if any, already
utilised by the assessee for the purchase or construction of
the new asset together with the amount so deposited shall be
deemed to be the cost of the new asset :
Provided that if the amount deposited under this sub-section
is not utilised wholly or partly for the purchase or
construction of the new asset within the period specified in
sub-section (1), then,-
(i) the amount not so utilised shall be charged under
section 45 as the income of the previous year in which the
period of three years from the date of the transfer of the
original asset expires; and
(ii) the assessee shall be entitled to withdraw such amount
in accordance with the scheme aforesaid.
Explanation.-[Omitted by the Finance Act, 1992, w.e.f.
1-4-1993.]