If any Exemption is claimed in case of the earlier year on fulfilling the conditions specified and later it is found that the condition is violated, the amount of exemption so availed previously shall now be made taxable. This is known as a deemed capital gain.
Example: Mr A sold his flat on 31/03/2017. On this sale, there was a capital gain of Rs. 2,00,000/-. Against the capital gains on the sale of this flat, Mr A claimed an exemption. However, subsequently, it was found that Mr A had violated one of the conditions specified. Now, Mr A is liable to pay tax on the amount of Rs. 2,00,000/- which was claimed as exempt earlier.