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Long term capital gain and sec 54ec exemption related issue.

Neha Gupta (article assitant) (37 Points)

30 June 2016

i am an individual assessee i have received some amount as compensation from my landlord for vacating the house property. And i have used this long term capital gain in purchase of NHAI bond partly and the rest part is left unused.How to deal with the unused LTCG part left. How to do tax treatment for it?

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9 Replies

CMA Poornima Madhava (CMA) (13102 Points)
Replied 30 June 2016

How can compensation received from landlord (for rented property) be treated as LTCG?

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Satyarth Prakash Dwivedi (Deadpool) (43 Points)
Replied 30 June 2016

Dear Neha,
This is not a capital gain and therefore investment u/s 54EC is not possible.
This will be treated as an income from other source and will accordingly be taxable.

Neha Gupta (article assitant) (37 Points)
Replied 30 June 2016

IT IS A LONG TERM CAPITAL GAIN AS PER TENANCY RIGHT. IF A PROPERTY IS UNDER RENT FOR MORE THAN 12 YEARS THEN AS PER TENANCY BRIGHTS IT WILL BE TREATED AS A CAPITAL ASSET.

CMA Poornima Madhava (CMA) (13102 Points)
Replied 30 June 2016

Okay. In that case, tenant will be the deemed owner of the house property as you have rightly said. Options I could think of are:

Exemption u/s 54 (to buy another residential house provided relevant conditions are satisfied) or
Exemption u/s 54GB (but this is complex)
To defer tax liability, deposit in capital gain deposit account. But if not utilized within the time limit, LTCG is payable in future.

Neha Gupta (article assitant) (37 Points)
Replied 30 June 2016

THAT IS CORRECT BUT I HAVE MADE THE INVESTMENTS IN NHAI BONDS INSTEAD OF IN ONE RESIDENTIAL HOUSE HENCE ELIGIBLE FOR 54EC EXEMPTION.

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CMA Poornima Madhava (CMA) (13102 Points)
Replied 30 June 2016

What I said is in addition to 54EC other exemptions are also possible in respect of unutilized LTCG

Neha Gupta (article assitant) (37 Points)
Replied 30 June 2016

TAHNK YOU!!

I AM AWARE OF THOSE EXEMPTIONS TOO. BUT I HAVE A DOUBT ON THE ISSUE THAT FOR SEC 54 DO WE NEED TO DEPOSIT THE LTCG UNUTILIZED IN CAPITAL DEPOSIT SCHEME ACCOUNT IN THE SAME YEAR OF TRANSFER OR LATER PERIOD.