04 August 2015
My friend has sold his flat in January and got the amount in account. Now in which Bond he can invest so as to save the entire capital gain tax.
Under section 54 the seller of the property can claim for tax exemption; to avail the benefits seller must use entire profit (capital gain) to buy another house. The seller has two options, either he can buy another house within two year from sale of property else he can build a house in three years. Buyer can also buy a house 1 year prior to selling the house and still can avail the benefit under section 54. If after selling property, seller has not identified the property yet. The seller has to open a special account i.e. capital gain accounting scheme. All the withdrawal from this account should be made only for purchase of property. However if seller failed to buy a property within three years after selling property the whole amount will exposed to LTCG.
Under section 54 EC, seller can invest in bonds issued by National Highway Authority of India (NHAI) and Rural Electrification Corporation (REC). Limit for exemption under section 54 EC is Rs. 50 Lakh.
However STCG is being added to the person’s income and exposed to normal income tax slabs.
Conclusion To save long term capital gain the seller has to buy a house property within two years of sale of capital asset or construct a house within three years. If seller is not able to identify a property he/she can open a capital gain accounting scheme’s special account and park the money until he finds the property (with limit of 3 years). Seller also can invest money in specific bond up to limit of Rs 50 Lakhs to save LTCG tax.
06 August 2015
Many thanks, Ankur !! It has become very clear now. Just one query, as for buying another house, there is a time bar of 3 years , is there any such time bar for investing in property?
I mean, within how many years or months, the assesse can buy the Bonds to save LTCG?
CAclubindia
