54 F disallowance

Dear Client,
Under Section 54 of the Income Taxt Act, investors can get an exemption of up to Rs. 1 lakh on LTCG tax from selling shares or mutual fund units for each financial year. By spreading their redemptions across two financial years, they can use the tax exemption limit for both years. Long term capital gains(LTCG) on sale of listed equity shares and equity oriented funds are taxed at 12.5%, over and above exemption of Rs. 1.25 lakhs. For other stocks and shares, the capital gains are taxed at 12.5% without any indexation benefits. As per the latest budget, securities sold before 23rd July 2024 are taxed at 10%, and those sold on or after 23rd July 2024 are taxed at 12.5%. In both cases, an exemption of Rs. 1.25 lakh is available, meaning only LTCG exceeding Rs. 1.25 lakh is taxable at the applicable rate. To claim a tax rebate under Section 54 of the Income Tax Act, capital gains arising out of the sale of an immovable property have to be reinvested to buy another residential house. The new residential house property should be purchased either one year before the date of capital gain or two years after the date of capital gain. In the case of constructing a new house, the individual is given an extended time period to construct a house, i.e., within three years from the date of receipt of capital gains from immovable property. In Budget 2024, it was proposed to reduce the LTCG tax on property to 12.5% from 20% while removing the benefit of indexation. Property buyers who have acquired property before July 23, 2024, will have the option to choose between the new rule (12.5% LTCG tax without indexation) and the old rule (20% LTCG tax with indexation) to ensure lower tax liability. Income Tax is a branch of law or legislation that eventually comes under the purview of Chartered Accountants and Tax Consultants who have expertise and in-depth knowledge on the subject and may guide you properly to understand and navigate the issue in the right way. So, it is recommended to consult with the expert professionals for precise and authentic information/clarifications on the subject.