Capital gain

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

07 September 2013 Dear Sirs,

One of my client sold his property(resi-house) in FY 2010-11 for 1 crore. He received 2 lakh cash as advance from buyer. Balance 98 lakhs have been deposited in HDFC bank(not in the CAPITAL GAIN SCHEME). His capital gain comes around 70 lakhs. He invested more than 70 lakhs by way of purchasing two residential house with in the FY 2010- 11, 2011-12.

My question is that should the sale proceeds invest in that Capital gain Scheme to enjoy the exemption u/s 54 compulsorily..???

If not invested in that Capital gain scheme what action can be taken by Dept.??

CA Pallav Singhania

CA Pallav Singhania (Expert)
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07 September 2013 Where the amount of capital gain is not so utilized for the purchase or construction of a new residential house before the due date of furnishing of the return of income, it shall be deposited by him on or before the due date in an account with a public sector bank in accordance with the Capital Gain Account Scheme, 1988. The amount already utilized on the new house together with the amount deposited shall be deemed to be the amount utilized for the purchase of new house under section 54.
If the amount deposited is not utilised for the purpose of purchase or construction of new house within the stipulated period, then the amount not so utilised will be treated as long term capital gain of the previous year in which the period of three years expires.
In such case the assessee is entitled to withdraw the amount from the bank.

Long Term Capital Gain Exemption for Investment in Certain Bonds (Section 54EC)
This exemption is is available an individual, HUF, company or any other person who invests the long term capital gain, within 6 months of a the transfer of the capital asset, in any of the specified bond (issued on or after April 1, 2006) redeemable after 3 years:

National Highway Authority of India (NHAI), or

Rural Electrification Corporation Ltd. (REC)

There is a limit of Rs. 50 lakh on the investments on or after April 1, 2007