Capital gains tax exemptions on reinvestment

NRIs are entitled to claim exemption from the tax if they reinvest long term capital gains /net sale consideration into following assets.

CAPITAL GAINS FROM

REINVESTMENT IN

CONDITIONS

AMOUNT EXEMPTED

RATE OF INTEREST

Long Term Capital Asset Being Residential House

Two Residential Houses in India*.

There are many conditions, which shall be provided on request**.

Minimum of:

a.    Amount reinvested.

b.    Long Term Capital Gains

Not Applicable.

Tax Saving Bonds issued by:

a.    National Highways Authority of India (NHAI) – (as per recent notification, NHAI bonds have been discontinued from April 1, 2022)

b.    Rural Electrification Corporation Ltd. (RECL).

c.    Power Finance Corporation Limited

d.    Indian Railway Finance Corporation Limited

e.    Bonds as may be notified by the Central
d.    Government.

a.    Investment is to be made within 6 months from the date of transfer of asset.

b.    Bonds are to be held for a period of 5 years.

Maximum exemption cannot be greater than Rs. 50 lakhs by reinvestment in such bonds.

Approx. 6% payable annually on the Tax savings Bonds.

The said interest shall be taxable in India

Any Long Term Capital Asset

Units of such funds as may be notified by the Central Government.

a.    Investment is to be made within 6 months from the date of transfer of asset.

b.    Units are to be held for a period of 3 years.

Maximum exemption cannot be greater than Rs. 50 lakhs by reinvestment in such units.

To be notified.

Any Long-Term Capital Asset Other Than Residential House

Entire Sale Proceeds in the Residential House in India.

There are many conditions, which shall be evaluated.

Long Term Capital Gains in proportion     of amount re- invested over Net Sale consideration.

Not Applicable.

 

Note: The above conditions have been provided briefly for your easy reference. There may be several additional conditions applicable which shall be provided separately on your request.

             

*   The Finance Act, 2019 has extended the benefit of exemption from levy of capital gains by investing the said capital gains in one residential house to two residential houses in India. So, the Government has extended the said benefit of re-investment to two residential properties, effective from Financial Year 2019-20.

                 

** The benefit of two residential houses can be availed, at the option of the person only once in his lifetime and only when the capital gains amount does not exceed Rs.2 crore. The case study explaining the said amendment is covered in the ensuing paragraph.

                                                                                                 


TDS provisions and tax liability on gains from transfer of Immovable property


Type of GainRate of TDSRate of Tax
Long Term20%* on amount of Sales Consideration20%* on amount of Capital Gains
Short Term30%* on amount of Sales ConsiderationSlab Rate* for amount of capital gains

* Plus applicable surcharge and cess

Updated as on 5.8.2022