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Long term capital gain

Purshottam (Proprietor) (25 Points)

25 November 2014

My friend had sold a commercial property for Rs. 84 Lacs in F.Y. 2012-13, Date of aquisition was 30/05/2006, Cost of acquisition was Rs. 1248846/-, indexed cost in F.Y. 2012-13 was 2050129/- of the said property with having a Long Term Capital Gain of Rs 6349871/-, He invested Rs. 50 Lacs in NHAI Bonds and Rs. 20 Lacs in Capital Gain Saving Desposit scheme to avoid tax on 1349871/-

Now he is not in favor of investing the deposit amount of Rs. 20 Lacs in residential property, therefore I want to ask whether he will have to pay Tax on Rs. 20 Lacs or on Rs. 1349871/- i.e. remaining amount of capital gain after indexation ? Also Please suggest the applicable section and rule for the same.

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6 Replies

govind (auditor assistant) (40 Points)
Replied 25 November 2014

Section 54 of IT act. Taxable amt is ₹ 1349871.

Mihir (Wealth Manager) (5293 Points)
Replied 25 November 2014

If the balane capital gain is not invested within the statutory period, then it will becom taxable at 20%.

umadevi musunuru (asst manager) (27 Points)
Replied 25 November 2014

As the asset sold is commercial property and invested in NHAI bonds then applicable section would be 54EC(any long term capital asset). On balance 1349871/- tax to be paid.

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Purshottam (Proprietor) (25 Points)
Replied 26 November 2014

Originally posted by : umadevi musunuru
	As the asset sold is commercial property and invested in NHAI bonds then applicable section would be 54EC(any long term capital asset). On balance 1349871/- tax to be paid.

Thanks for the reply and views,

But I would further like to ask considering 54EC (1) b, that Rs. 20 Lacs was invested in Capital account gain deposit scheme, to avoid the tax on 1349871/-, so if the said deposit is converted into money whether the tax would have to paid on 20 lacs or 13.50 Lacs?

sudhir (Company Secretary) (54 Points)
Replied 26 November 2014

When you opt for investment under section 54EC, deposition of balance amount under CGAS is not available. Hence any amount remained uninvested over and above 50 lacs will be taxable. Further, if you have opted deposit under CGAS, withdrawal of the amount after the expiry of 3 years is taxable. Hence in this case, amount withdrawn I.e., 20 lacs is taxable.

Giridhar S Karandikar (Team Lead) (7543 Points)
Replied 27 November 2014

with regards to comercial property there's no tax benefit on LTCG apart from section 54EC. Hence your question of investing the balance LTCG in residential house does not arise and you need to pay tax on balance CG.

In case of residential property you can use a combination of section 54 & 54EC by investing a part in residential property and if there remains any balance then that can be invested in 54EC bonds.