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Query regarding investment in 54ec bonds in any fy

19 April 2016

hi,

my mother had sold a land on November'15 worth Rs 1030000 which she had bought around 1984 at RS 10000 only. She wants to buy a garage with Rs 500k and remaining amount she will deposit in 54EC bonds. Now is it necessary to invest in 54EC bonds with 31st march 2016 or within 6 months tenure after date of sale which ends around May 2016 and that falls in FY 2016-17.

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15 Replies

(Guest)

She can invest within 6 months that is before may'16

Chinnu Raj (CA Final Student B.Com) (1067 Points)
Replied 19 April 2016

As per the provisions of Sec-54EC of IT Act,1961: Amount in NHAI Bonds or REC bonds should be made within 6 months from the date of transfer of capital asset.

So in your case, it would be May 2016.

Biswapriya Roy Chowdhury (19 Points)
Replied 19 April 2016

so no tax to be paid for the FY 15-16,isn't it?

Chinnu Raj (CA Final Student B.Com) (1067 Points)
Replied 19 April 2016

It depends based on ur investment made in Sec-54EC. If you invest complete capital gain amount, you may not required to pay any tax during the FY:15-16

Biswapriya Roy Chowdhury (19 Points)
Replied 19 April 2016

sir,

thanks for your quick replies.

can you please tell me the approx capital gain amount based on the above.She sold land which was in Barrackpore, westbengal,which falls under panchayat area.The land was agricultural land.

Chinnu Raj (CA Final Student B.Com) (1067 Points)
Replied 19 April 2016

If such rural agricultural land was sold for the purpose of Agriculture, then it is out of the ambit of Capital Gains. If the same was sold for the purpose other than agriculture land, then in your case, it will be taxable as Long term Capital Gain.

Computation is as follows:

Sale Considration = 10,30,000

Less: Selling expenses = Nil (Deduct if any, since you have not mentioned anything in this regard, i took it as zero)

Net Sale Consideration = 10,30,000

Less: Indexed Cost of Acquisition = 86,480 (10000*1081/125, since you have just mentined 1984, i took it as FY:1984-85)

Less: Indexed Cost of Improvement = Deduct if any

Long Term Capital gains = 9,43,520

Less: Exemption u/s 54EC = xxxx

Taxable Long Term Capital Gain = xxxx

Tax Liability u/s 112 = Taxable Long Term Capital Gain*20%

Hope your doubt has been clarified...

Biswapriya Roy Chowdhury (19 Points)
Replied 19 April 2016

yes yes definitely sir.thanks for all your replies

Chinnu Raj (CA Final Student B.Com) (1067 Points)
Replied 19 April 2016

You are most welcome ji...

Biswapriya Roy Chowdhury (19 Points)
Replied 21 April 2016

Sir my advocate is saying that we can't deposit in 54ec bonds because 31st mar has crossed and the land was sold in 19th Nov '15.

I also want to buy a garage.I was informed from Internet that I can buy a property for which I had deposit money in capital gain account scheme in any bank and withdraw it within 3 years and utilize that money to buy property only.

I am giving you all the details:

land purchased on 11.04.89 at RS 5000/-

land sold on 19.04.15 at RS 1030000/-

my plan is to deposit 4.5 lakh in capital a/c scheme in bank and balance 5.8 lakh in 54 ec bonds in this month.

please help me out as I am not finding my advocate reliable.

thanks in advance

Chinnu Raj (CA Final Student B.Com) (1067 Points)
Replied 21 April 2016

Hello,

Could you please clarify me the following??

1. The purpose for which the agricultural land is being used by the buyer?

2. What you are going to buy with the amount you have invested in the Capital Account Gain Scheme account?

With the following, ill try to give up you the revised computation.

Biswapriya Roy Chowdhury (19 Points)
Replied 21 April 2016

1)that was not a agricultural land and it was left as it was,no development was done also.that was in Barrackpore,dist-north 24 parganas and in mohanpur grampanchayat.

2)want to buy a garage with max Rs 5 lakh and balance in 54 EC bonds.And till date I have not invested in capital gain account scheme.

Chinnu Raj (CA Final Student B.Com) (1067 Points)
Replied 21 April 2016

Well if it is for garage, i think there is no exemption available.. You mean a building used for parking your vehicles right??

Correct me if iam wrong...

Biswapriya Roy Chowdhury (19 Points)
Replied 22 April 2016

No sir,a small garage only which not a building.and that may be used for parking or later on for godown as well.

my main query is can I do these things now I.e. invest in bonds and purchase a garage in the FY 16-17 since it was sold in FY 15-16.

I may keep the full amount in bonds also that's not an issue.

Chinnu Raj (CA Final Student B.Com) (1067 Points)
Replied 25 April 2016

Sorry for the delay response... I purely suggest you to invest the entire amount in bonds itself to claim entire exemption. Since garage is not covered to be claimed as an exemption, it may not be considered for you to take it as deduction at the time of payment of tax on LTCG. However the option to invest in Capital Gain Account scheme is not available when you wish to purchase bonds...Entire amount need to be invested within 6 months from date of sale..