Net Sale Proceed From Commercial Property Has To Be Invested In A Residential Property For LTCG Exemption

Exemption under Section 54 is available for all residential properties. Deduction for SCSS is available in the year in which deposit is made. Profit or loss from futures or options is treated as business income and not as capital gains

Balwant Jain

Updated on: 24 February 2024 9:30 am

Residential Property, LTCG, Commercial property

I understand that the capital gains earned on sale of property can be saved by investing in another property. But recently, I also read that this is applicable on residential properties only. Do the rules apply in case of individuals letting out residential property as well as for self-occupied commercial property?

The exemption under Section 54 of the Income-tax Act, 1961 in respect of long-term capital gains (LTCG) is available to individuals and Hindu Undivided Families (HUFs) in respect of all residential properties, whether self-occupied or let out.

However, if you are selling a commercial property, then exemption for LTCG can be claimed under Section 54F (and not under Section 54) by investing in a residential property. The rules are broadly the same, but in case of Section 54F, the net sale proceeds have to be invested, whereas Section 54 requires you to invest only the LTCG after applying indexation in a residential property in both the cases.

Additionally, you can invest the indexed capital gains in capital gains bonds of specified financial institutions under section 54EC to save tax in both the cases.

Can I claim a deduction of Rs 1.50 lakh each year on the same amount deposited under the Senior Citizen Saving Scheme (SCSS) i.e., if I had invested Rs 15 lakh in the year 2023-2024, can I claim a deduction of Rs. 1.50 lakh in the year 2023-2024, 2024-2025, 2025-2026 on the same amount invested in 2023-2024?

The deduction for SCSS is available in the year in which you make the deposit. Since the maximum limit of deduction under Section 80C is Rs. 1.50 lakh per annum, you cannot get a deduction exceeding that amount in one year, even if you deposit more money.

So you can make the deposits under SCSS in such a way that you are able to claim a deduction of Rs. 1.50 lakh every year if it suits you.

Are profits or loss from stock futures where securities transaction tax (STT) is paid considered as short-term capital gains (STCG)? Can loss from these trades be carried forward to the next year?

Profit or loss from futures or options is treated as business income and not as capital gains. Such profits are not treated as speculation profits, and therefore, loss from these trades can be set off from other income, excluding salary, if any during the year.

Any such unabsorbed loss can be carried forward for eight years for set-off against business income.

The author is a tax and investment expert

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