In light of the recent Covid-19 pandemic, the Central Board of Direct Taxes (CBDT) released a notice on January 6, 2023, addressing the extended time limit for compliance, for Individuals or HUFs, to be made for claiming exemption under Section 54-54GB of the Income Tax Act of 1961 (‘ Act’). This notification was in response to the fact that the time limit for compliance had been extended.

Given the representations received, the then-prevailing COVID-19 pandemic and resultant limitations causing genuine hardship to taxpayers in making the stated compliances under the Act, the Central Board of Direct Taxes (CBDT) has exercised its power under Section 119 of the Act, providing that the compliances to be made by taxpayers, including investment, deposit, payment, acquisition, purchase, construction, or such other action, for claiming any exemption under the provisions of Section 54 to 54GB of the Income-tax Act, 1961. (hereinafter referred to as “the Act”) for which the last date is between April 01, 2021, and February 28, 2022 (both days inclusive), now be completed on or before March 31, 2023.

Earlier, Point 7 of the Circular allowed the aforementioned compliances with a last date between April 01, 2021, and September 29, 2021 (inclusive) to be completed by September 30, 2021.

Under section 54, it is imperative to note that with effect from Assessment Year 2020-21 corresponding to FY 2019-20, a capital gain exemption is available for the purchase of two residential houses in India. However, the exemption is subject to a capital gain not exceeding Rs 2 crore. Also, the exemption is available only once in the lifetime of the seller.