Profits or gains arising from transfer of a capital asset are called “Capital Gains”. For the purpose of taxation, depending on the holding period of assets they are classified into two categories as “Short Term Capital Gains” and “Long Term Capital Gains”.

How to minimize tax arising on capital assets?

The income tax act provides tax saving options in the form of various exemptions/deductions against the capital gains. You can plan your taxes considering section-wise deductions available under the Act and the various conditions that need to be fulfilled to claim or be eligible for the same. Following are the list of exemptions available:

Section 54 – Capital gain arising on transfer of residential house property

Section 54B – Capital gain on transfer of property used for agricultural purposes

Section 54D – Capital gain on compulsory acquisition of land and building

Section 54EC – Capital gain not to be charged on Investment in certain bonds

Section 54F – Capital gain on transfer of certain capital assets not to be charged in case of Investment in residential House

Section 54GB – Capital gain on transfer of residential property not to be charged in certain cases

Section 54GA – Capital gain on transfer of assets in cases of shifting of Industrial undertaking from urban area to any SEZ

Section 54G – Capital gain on transfer of assets in cases of shifting of Industrial undertaking from urban area to rural area

SECTION 54 – CAPITAL GAIN ARISING ON TRANSFER OF RESIDENTIAL HOUSE PROPERTY 

Particulars
Eligible Assessee	Individual HUF
Capital Asset	Residential House (Buildings or Lands  appurtenant thereto)
Conditions to be satisfied	1. Capital Asset should be Long Term Capital Asset2. The new residential house property should be purchased either one year before the date of transfer or two years after the date of sale or transfer. In case of construction of a new house, the individual is given an extended time period to construct a house i.e., within three years of the date of transfer or sale.3. In case of compulsory acquisition, the period of acquisition or construction will be determined from the date of receipt of compensation. 4. The house property that is bought should be in India.
Amount of Exemption	Lower of:1. Amount of capital gains on transfer of residential property.2. The investment made for constructing or purchasing new residential property.
If  fails to purchase or construct the property	1. Assesse can deposit the capital gains proceeds in Capital gains Account Scheme in any public sector bank and avail the exemption from this section.2. The deposition has to be done before the due date for filing income tax returns.3. The deposited amount has to be utilized to purchase/construct the house as per the provisions of the law.
Restriction on Transfer of New Asset	If the new asset is transferred before 3 years from the date of its acquisition or construction, then cost of asset will be reduced by capital gains.

Section 54B – Capital gain on transfer of property used for agricultural purposes

Particulars
Eligible Assesse	Individual or HUF
Capital Asset	Urban agricultural land (Long Term or Short Term)
Conditions to be satisfied	1.The agricultural land should be used by the individual or his parents for agricultural purpose at least for a period of two years immediately preceding the date of transfer. In case of HUF the land should be used by any member of HUF.2. Within a period of two years from the date of transfer of old land the taxpayer should acquire another agricultural land (Urban or Rural).
Amount of Exemption	Lower of:1. Amount of capital gains on transfer of Asset.2. The investment made for purchasing the land.
If  fails to purchase or construct the property	1. Assesse can deposit the capital gains proceeds in Capital gains Account Scheme in any public sector bank and avail the exemption from this section.2. The deposition has to be done before the due date for filing income tax returns.
Restriction on Transfer of New Asset	If the new asset is transferred before 3 years from the date of its acquisition or construction, then cost of asset will be reduced by capital gains.

Section 54D – Capital gain on compulsory acquisition of land and building

Particulars
Eligible Assesse	Any assesse
Capital Asset	Land and Building forming part of an Industrial Undertaking
Conditions to be satisfied	1. The land and building should be used by the assesse for the purpose of Industrial Undertaking in the two years immediately preceding the date of transfer. 2. Within a period of 3 years from the date of transfer of old land the taxpayer should purchase any other land or Building or construct any building (for shifting or re-establishing the existing undertaking or setting up a new industrial undertaking).
Amount of Exemption	Lower of:1. Amount of capital gains on transfer of property.2. The investment made for constructing or purchasing the asset.
If  fails to purchase or construct the property	1. Assesse can deposit the capital gains proceeds in Capital gains Account Scheme in any public sector bank and avail the exemption from this section.2. The deposition has to be done before the due date for filing income tax returns.
Restriction on Transfer of New Asset	If the new asset is transferred before 3 years from the date of its acquisition or construction, then cost of asset will be reduced by capital gains.

Section 54EC – Capital gain not to be charged on Investment in certain bonds

Particulars
Eligible Assesse	Any assesse
Capital Asset	Land or building or both
Conditions to be satisfied	1. Long Term Capital Asset (can also be a depreciable asset held for more than 24 months) 2. Within a period of 6 months from the date of transfer, the capital gains arising from such transfer should be invested in a long Term specified asset.Long term specified asset: Bond of  REC or NHAI
Amount of Exemption	Lower of:1. Amount of capital gains on transfer of property;2. The investment made for constructing or purchasing the asset;Up to a maximum limit of Rs. 50 Lakhs
If  fails to purchase or construct the property	1. Assesse can deposit the capital gains proceeds in Capital gains Account Scheme in any public sector bank and avail the exemption from this section.2. The deposition has to be done before the due date for filing income tax returns.
Restriction on Transfer or conversion of New Asset	1. The Assesse should not transfer or convert or avail loan or advance on the security of such bonds for a period of 5 years from the date of acquisition of such bonds.2. In case of transfer or conversion, before expiry of 5 years, the capital gain exempted earlier shall be taxed as long term capital gain in the year of violation of condition.

Section 54F – Capital gain on transfer of certain capital assets not to be charged in case of Investment in residential House

Particulars
Eligible Assesse	Individuals or HUF
Capital Asset	Long Term Capital Asset not being a residential House.
Conditions to be satisfied	1. Purchase of one residential house situated in India within a period of 1 year before or 2 years after the date of transfer or Construct one residential house in India within 3 years from the date of transfer.2. The assesse should not own more than one residential house on the date of transfer.
Amount of Exemption	1. If cost of new residential house  ≥ Net sale consideration of original asset, entire capital gains is exempt2. If cost of new residential house  < Net sale consideration of original asset, only proportionate capital gains is exempt i.e.                Amount invested in new residential               house LTCG ×                        Net Sale Consideration
Restriction on purchase or construction of additional residential house	1. The assesse should not purchase any other residential house within a period of 2 years or construct any other residential house within a period of 3 years from the date of transfer of the original asset.2. If the violation is done, then the capital gains exempted earlier under section 54F shall be deemed to be taxable as LTCG in previous year of such violation
Restriction on Transfer of New Asset	If the new asset is transferred before 3 years from the date of its acquisition or construction, then the capital gains exempted earlier under section 54F shall be taxable as LTCG.

Section 54GB – Capital gain on transfer of residential property not to be charged in certain cases

Particulars
Eligible Assesse	Individual or HUF
Capital Asset	Residential House Property (a house or a plot of Land)
Conditions to be satisfied	1. The asset should be long term capital Asset.2.The assesse should utilize the net consideration to subscribe in equity shares of eligible company before the due date of furnishing of return of income and the company should within 1 year from the date of subscription in equity shares by the assesse utilize this amount for purchase of new asset.
Restriction on Transfer of New Asset	1. If the equity share or new plant & machinery is transferred within 5 years from date of subscription/acquisition then exempt capital gains taxable in PY of transfer of equity share or New Plant & machinery in the hands of Assesse (Individual or HUF)2. In case of Computer and computer software acquired by eligible start up restriction of 3 years will apply.
Amount of Exemption	Cost of New plant & MachineryLTCG ×                        Net Sale Consideration
If  fails to purchase	1. The company can deposit the capital gains proceeds in Capital gains Account Scheme before the said due date to the extent not utilized by the company for the purchase of new asset

Section 54GA – Capital gain on transfer of assets in cases of shifting of Industrial undertaking from urban area to any SEZ

Particulars
Eligible Assesse	Any person
Capital Asset	Plant & Machinery or land or building for shifting industrial undertaking from urban area to SEZ
Conditions to be satisfied	1.Capital Asset can be short term or long term2.The assesse has to purchase/ construct plant & machinery, land or building in such SEZ or   shift the original assets to that area, or incur notified expenses;Within 1 year before or 3 years after the date of transfer.
Amount of exemption	Lower of:1. Amount of capital gains or2. The cost of new asset
Restriction on transfer of new asset	If the new asset is transferred within 3 years from the date of purchase/construction, then cost of acquisition of new asset will be reduced by exempted capital gains
If  fails to utilize for the specified purpose	The Assesse can deposit the capital gains proceeds in Capital gains Account Scheme before the date of furnishing the return of income to the extent not utilized by the company for the specified purpose.

Section 54G – Capital gain on transfer of assets in cases of shifting of Industrial undertaking from urban area to rural area

Particulars
Eligible Assesse	Any person
Capital Asset	Plant & Machinery or land or building for shifting industrial undertaking from urban area to rural area.
Conditions to be satisfied	1.Capital Asset can be short term or long term2.The assesse has to purchase/ construct plant & machinery, land or building in such rural area or   shift the original assets to that area, or incur notified expenses;Within 1 year before or 3 years after the date of transfer.
Amount of exemption	Lower of:1. Amount of capital gains or2. The cost of new asset
Restriction on transfer of new asset	If the new asset is transferred within 3 years from the date of purchase/construction, then cost of acquisition of new asset will be reduced by exempted capital gains
If  fails to utilize for the specified purpose	The Assesse can deposit the capital gains proceeds in Capital gains Account Scheme before the date of furnishing the return of income to the extent not utilized by the company for the specified purpose.