Gains arising out of the sale of capital assets are known as Capital Gains, which are taxable under the Income Tax Act. However, the Central Government has introduced various exemptions and deductions that allow the assessee to benefit from tax relief on capital gains, provided they meet specific conditions and circumstances, thereby optimising their tax liability.
Let us discuss the capital gains exemption applicable after the introduction of the recent Union Budget 2024.
List of Exemptions Under Capital Gain
Here is the complete list of capital gains exemption and deduction you can avail by meeting the conditions for the same:
|
Capital Gains Exemption/Deduction |
Asset Type |
Exemption Amount |
Applicability |
|
Exemption under Section 54 of the Income Tax Act |
Gains on sale of residential property |
The cost of the new asset or Long term capital gains whichever is lesser, but the exemption amount is up to ₹10 crore. |
Assessee can be Individual or HUF |
|
Exemption under Section 54B of the IT Act |
Gains on sale or transfer of land for agricultural purpose |
Cost of the new asset or long term capital gain whichever is lesser |
Assessee can be Individual and HUFs, it is applicable for both LTCG and STCG |
|
Exemption under Section 54D |
Profit on mandatory acquisition of land and building for industrial undertaking |
Cost of the new asset or long-term capital gains whichever is lower. |
Any assessee is applicable |
|
Exemption under Section 54EC |
Gain from certain types of bond investments |
Exemption Amount = Cost of new asset x Capital Gain / Net Consideration (the maximum limit is capped to the amount of capital gains) |
Any assessee can avail this benefit; applicable for an LTCG |
|
Exemption under Section 54EE |
Profit from investments in a unit of a specific fund |
Exemption Amount = Cost of new asset x Capital Gain / Net consideration (the maximum limit is capped to the amount of capital gain) |
Any assessee can avail; applicable only for LTCG |
|
Exemption under Sections 54G and 54GA |
Gain from investment in a residential house |
Cost of a new asset or long-term capital gain, whichever is lesser |
Any assessee can avail this benefit; it is applicable for both STCG and LTCG |
Bottom Line
To sum up, there are multiple ways through which you can claim a deduction or exemption on your capital gains. Knowing the capital gains exemption amount, sections and type of asset can help you maximise your tax savings. Having an awareness of the relevant sections and the conditions can be beneficial not only for newbie investors but also for experienced investors.