Can you explain the provisions of Section 54F which exempts capital gain from being taxed under certain circumstances? Can we claim exemption under this Section for capital gain arising from sale of jewellery?

Neeraj Kumar

Section 54F of the Income Tax Act, 1961 (‘the Act’) provides for exemption against the long-term capital gain arising from the sale of a capital asset other than a residential house. This exemption is available only when the net proceeds arising on account of sale of capital asset is invested to purchase a residential house (‘new house’) within one year before or two years after the sale of the asset or the net proceeds are invested to construct a residential house property within three years from the date of sale of asset.

Further, the person claiming the above exemption should not own more than one house on the date of sale of original asset (other than the new house). Where the entire net sale proceeds are not invested and only a part is invested, the exemption u/s 54F will be available only on proportionate basis.

Also, the deduction for the capital gain can be claimed u/s 54EC by investing the capital gain in the specified bonds issued by National Highways Authority of India and Rural Electrification Corporation, subject to overall investment limit of ₹50 lakh in the financial year in which the original asset is sold and the subsequent financial year taken together. Subject to the conditions specified above and other conditions as specified in the Act, you may claim the deduction against the long-term capital gain arising from the sale of jewellery.

What are the rules relating to claiming deduction for health insurance premium under Section 80D? I am paying health insurance premium for my father-in-law and mother-in-law. Can I claim these as deduction?

Jaivishnu KS

According to Section 80D of the Income Tax Act, an individual may claim a deduction of ₹25,000 in respect of the medical insurance premium paid for himself, spouse and dependent children.

Where an individual makes the payment for medical insurance premium for his/her parents, then a further deduction of ₹25,000 (₹30,000 where the parents are 60 and above) can also be claimed.

It is to be noted that the deduction for health insurance premium paid for parents is available to the individual in respect of his own parents. Thus, the health insurance premium paid for parents-in-law shall not be eligible for deduction u/s 80D of the Act.

The writer is a practising chartered accountant. Send your queries to taxtalk@thehindu.co.in

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