Benefits of Section 54 under the Income-tax Act, 1961

Benefits of Section 54 under the Income-tax Act, 1961

Discover the advantages of Section 54 under the Income-tax Act, 1961, in our blog. This provision provides relief to individuals and Hindu Undivided Families (HUFs) dealing with capital gains from residential property sales. Join us as we delve into eligibility criteria, implications of property transfers, and practical strategies to maximize tax benefits under Section 54. Let’s simplify tax complexities and equip you with valuable insights for smarter financial decisions.

Section 54 of the Income-tax Act 1961

Section 54 provided benefits exclusively to individuals or Hindu Undivided Families (HUF).

Essentials under Section 54 of the Income-tax Act 1961

Under Section 54 of the Income-Tax Act, individuals or HUFs selling residential property may avail tax exemptions on capital gains if a significant portion of the proceeds is reinvested in purchasing or constructing residential property.

Who is eligible to receive benefits under Section 54?

As per this section, when an assessee sells a long-term residential property and invests in an alternative residential property, they become eligible for tax exemption.

Consequences of transferring a new Property within 3 years

If the assessee buys or constructs a new house within the stipulated time after selling the old property, they may apply for exemption under Section 54.

If the newly acquired property is sold within three years, certain conditions apply. Two scenarios are possible for tax calculation:

Points to remember

Final thoughts

Section 54 of the Income Tax Act provides exemptions for the sale of residential property, offering tax benefits on long-term capital gains from such sales. Individuals can claim these benefits by purchasing or constructing a new residence or by depositing the proceeds into the Capital Gains Account Scheme at authorized banks.

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We have taken all steps to ensure that the information on the website has been obtained from reliable sources and is accurate. However, this website is not intended to give legal, tax, accounting or other professional guidance. We recommend appropriate advice be taken prior to initiating action on specific issues.