Section 54 is applicable when an individual/HUF sells a residential property and buys another residential property, then he will be eligible for claiming Exemption u/s Section 54.
Applicability
If the newly purchased or constructed house is sold before 3 years from the date of capital gain on sale, then the exemption claimed earlier under section 54 shall be taxable in the year of sale.
1. This Section is applicable only to Individual or HUF.
2. The Asset sold should be a Residential property.
3. The seller should purchase residential property either 1 year before or after 2 years after selling/transfer.
4. In case of Construction of property, the seller has to construct the residential property within 3 years from the date of sale/transfer.
If the newly purchased or constructed house is sold before 3 years from the date of capital gain on sale, then the exemption claimed earlier under section 54 shall be taxable in the year of sale.
5. The new Residential property should be in India.
Maximum Exemption Limit
The Maximum amount of exemption available under this section will be
a. Capital gains on transfer of residential house.
Or
b. Investment made in purchase or construction of new residential house property.
whichever is lower.
