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Investment time limit for 54 ec bonds

Paras Kumar Jain (Prop.) (69 Points)

21 May 2012

Dear Friends,

I want to know time limit for Investment in 54 EC Bonds .

Case Detail

Possession of Land given in Dec . 2011 Month after taking Part Payment . sale deed execuated in March 2012 & Received rest balance Payment .

Pl tell me from which date (Possession date or Sale deed date )I should consider six month time limit to invest in 54 EC Bonds.

I also want to know if I have paid some amount to other family member from sales considertaion even though thy are not legal heirs . whether amount paid to other family member can be deducated from sales consideration at the time of calcualtion of capital gain

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7 Replies

Prateek Agarwal (Sr. Executive - Finance & Accounts) (1732 Points)
Replied 21 May 2012

From the date of execution of sale deed since it is the actual transfer of land.

1 Like

Paras Kumar Jain (Prop.) (69 Points)
Replied 21 May 2012

Thank for reply

Pl also clarify about second query

CA Tushar Lakhanpal (CA) (416 Points)
Replied 21 May 2012

The date of actual transfer of land is the date of possession of land ( Refer Sec 2(47) Defination of transfer pt. 5)

Sec 2(47)

pt.5 any transaction involving the allowing of the possession of any immovable property to be taken or retained in part performance of a contract of the nature referred to in section 53A of the transfer of property act

if other family members are neither LEGAL HEIRS nor CO-OWNERS then such transfer of income would attract CLUBBING OF INCOME PROVISIONS in your hand

that means no need to deduct such amount transferred from sale consideration HOWEVER if it is actually paid as a commission or brokerage to them then it is allowed

please note

ur land must be a capital asset (U/S 2(14) with the period of holding of more than 36 months

Regards

Tushar

1 Like

Paras Kumar Jain (Prop.) (69 Points)
Replied 21 May 2012

Thanks Once again

Pl help to get some more clarification

Since it is ancestral Property Hence some amount of sales considerartion given to sister of seller . She is the confirming patry on sale deed while amount given to her is not mentioned in sale deed since the same is paid by seller .

Now I want to know whether the amount paid to sister can be deducated from sales consideration for calculation of capital gain

CA SENTHIL PRABHU (CHARTERED ACCOUNTANT) (132 Points)
Replied 21 May 2012

Consideration given to sister is not deductible. Since its only an application of Income...

CA Tushar Lakhanpal (CA) (416 Points)
Replied 22 May 2012

sister of the seller is although a co owner since she is also a legal heir of the property but since her name is not mentioned in the sale deed nor anything related to her share in the property is mentioned there in ... that's why u cannot show the amount paid to her .. any such amount (if shown) will attract clubbing provisions in the hands of the seller

Regards

Tushar

Roshan Thomas (C.E.O ) (356 Points)
Replied 22 May 2012

Regarding the first part of your question -

Investment time limit should be computed from the date of receipt of sales consideration or date of transfer which ever is later. In your case it is the date of receipt of sales consideration.

Further since the transfer was made in March 2012 you can avail a special benefit of exemption upto 1 crore ( 50 Lakhs + 50 Lakhs) . This is becase investment in such bonds by an assessee cannot exceed Rs 50 lakhs in any financial year and such investment should be made within 6 months of receipt. Since the transfer is made in March you can invest 50 lakhs in march and another 50 lakhs in April (within 6 months)

Now regarding your second query

You can consider investing the amount payable to sister in 54EC bonds and then gift her those bonds because gift is not considered a transfer under Capital Gains and even your sister will be exempt because gift received from relative is exempt. Thus by this way both of you can avoid tax !