Budget 2012 Income Tax: New Section 54GB, Exemption from Capital Gain if invested in Equity

In Budget 2012 new Section 54GB is proposed to be inserted to provide exemption from long term capital gain on sale of residential house by Individual or HUF if the net consideration received is invested in equity shares of eligible company.

The details of the section 54GB in plain terms is given as under:

Exemption is provided from

  • Long Term Capital Gain from
  • Sale of Residential House to
  • Individual or HUF

If, the assessee has invested

  • before the due date for filing of return
  • net consideration received in
  • equity shares of eligible company

and, the company has

  • within one year of subscription
  • utilised the amount for purchase of new assessee

the amount of net consideration in proportion to the amount invested shall be exempt from capital gain.

If the equity shares are sold or transferred by the assessee the amount of capital gain shall again be taxed.

So, all in all if the assessee invests proceeds of sale of residential house in a company which utilises it for purchase of new asset then the same shall be allowed as deduction from capital gain.


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  1. Sir,
    This section says properties sold before 2017> Does it mean that properties sold in financial year 2011-12 and before are also eligible> In case proceeds are lying in capital gains account scheme> PLease explain

  2. Dear Sir,

    Section 54GB has just been added to the IT Act. Can you give a write up on your views.

    2 particular questions
    1. Says w.e.f 1-4-2013 – Does it mean sale of property this year 1-4-12 to 31-3-13 is not eligible

    2. Explain sub section 6(b)(i)


    1. Hi Kushal, Very interesting conmmet. You have brought up a topic that many Mutual Fund investors are confused about. But first, let me tell you that investing in Mutual Fund Schemes solely for dividends is not advisable! Read on to know why Suppose, the Mutual Fund scheme has NAV of Rs. 12.25 and it pays out a dividend of Rs.1.25 per unit to investors. The new NAV for the scheme on the dividend payout date will be Rs.11 (12.25 1.25). So, you got the Rs.1.25 dividend per unit from your holdings only. Unlike stocks, where you get Dividend from the income earned by the company, Mutual Funds take the money out from the scheme’s kitty and distribute to investors. Its not dividend, its a kind of withdrawal. I prefer Growth option while investing myself in Mutual Fund schemes. The only benefit of choosing dividend payout option in ELSS scheme is that you can get the tax free amount back from the ELSS investments even during lock-in period while enjoying the tax benefit on the full amount invested initially. Regards,Shweta

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