Quantum of exemption u/s 54ec

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

06 March 2015 Dear All

I have a query as follows:

As per clause (b) of Section 54EC(1), where amount invested in specified bonds is less than LTCG, then only proportionate exemption can be claimed under this section.

However, on thorough perusal of various Case Laws, Tax Planning Books & ready recknor, it is observed that nowhere this proportionate ceiling has been taken into account. It is simply given that, Exemption u/s 54EC can be claimed as follows:

Amount invested in Bonds or LTCG, (whichever is lower)

Relevant facts of my case are:

Sale consideration is Rs 100 lacs, Indexed COA is Rs 20 lacs and LTCG is Rs 80 lacs.

Query: Here, I can't invest more than Rs 50 lacs in bonds and by invoking clause (b) of section 54EC(1) I can not claim full exemption of Rs 50 lacs.

Please share your experience and views.

Thanks!

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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06 March 2015 In the cited example you can claim Rs.50/- lakhs u/s 54EC(1)(b) because the calculation goes like this.

Capital gain X amount invested in bonds / capital gains.

Balance of LTCG Rs.30/-lakhs will be taxed u/s 112(1).

Querist : Anonymous

Querist : Anonymous (Querist)

07 March 2015 Thank you Sir for prompt reply.

However, as per my understanding of Section 54EC(1)(b) calculation should be as follows:

(Exemption = Amount Invested/LTCG x Amount Invested)