Section 54F of Income Tax Act "Capital gain on transfer of certain capital assets not to be charged in case of investment in residential house"
54F. (1) Subject to the provisions of sub-section (4),
where, in the case of an assessee being an individual or a
Hindu undivided family, the capital gain arises from the
transfer of any long-term capital asset, not being a
residential house (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 (hereafter in this section referred to as the
new asset), the capital gain shall be dealt with in
accordance with the following provisions of this section,
that is to say,-
(a) if the cost of the new asset is not less than the net
consideration in respect of the original asset, the whole of
such capital gain shall not be charged under section 45 ;
(b) if the cost of the new asset is less than the net
consideration in respect of the original asset, so much of
the capital gain as bears to the whole of the capital gain
the same proportion as the cost of the new asset bears to
the net consideration, shall not be charged under section
45:
Provided that nothing contained in this sub-section shall
apply where-
(a) the assessee,-
(i) owns more than one residential house, other than the new
asset, on the date of transfer of the original asset; or
(ii) purchases any residential house, other than the new
asset, within a period of one year after the date of
transfer of the original asset; or
(iii) constructs any residential house, other than the new
asset, within a period of three years after the date of
transfer of the original asset; and
(b) the income from such residential house, other than the
one residential house owned on the date of transfer of the
original asset, is chargeable under the head "Income from
house property".
Explanation.-For the purposes of this section,-
"net consideration", in relation to the transfer of a
capital asset, means the full value of the consideration
received or accruing as a result of the transfer of the
capital asset as reduced by any expenditure incurred wholly
and exclusively in connection with such transfer.
(2) Where the assessee purchases, within the period of two
years after the date of the transfer of the original asset,
or constructs, within the period of three years after such
date, any residential house, the income from which is
chargeable under the head "Income from house property",
other than the new asset, the amount of capital gain arising
from the transfer of the original asset not charged under
section 45 on the basis of the cost of such new asset as
provided in clause (a), or, as the case may be, clause (b),
of sub-section (1), shall be deemed to be income chargeable
under the head "Capital gains" relating to long-term capital
assets of the previous year in which such residential house
is purchased or constructed.
(3) Where the new asset is transferred within a period of
three years from the date of its purchase or, as the case
may be, its construction, the amount of capital gain arising
from the transfer of the original asset not charged under
section 45 on the basis of the cost of such new asset as
provided in clause (a) or, as the case may be, clause (b),
of sub-section (1) shall be deemed to be income chargeable
under the head "Capital gains" relating to long-term capital
assets of the previous year in which such new asset is
transferred.
(4) The amount of the net consideration 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 by which-
(a) the amount of capital gain arising from the transfer of
the original asset not charged under section 45 on the basis
of the cost of the new asset as provided in clause (a) or,
as the case may be, clause (b) of sub-section (1), exceeds
(b) the amount that would not have been so charged had the
amount actually utilised by the assessee for the purchase or
construction of the new asset within the period specified in
sub-section (1) been the cost of the new asset,
shall be charged under section 45 as 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 the
unutilised amount in accordance with the scheme aforesaid.
Explanation.-[Omitted by the Finance Act, 1992, w.e.f.
1-4-1993.]