Deduction under sec 54ec if investment made after 6 month.

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KARAN SHAH (Querist)
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25 January 2014 Sir my client sold Residential property on 26th April, 2011 & he had longterm capital gain amounting to Rs.22 lacs. For getting exemption u/s 54EC he invested in NHAI bond Rs. 25 lacs on 3rd April,2012 which is after 11 months of transfer of Asset. So are We still eligible to get exemption u/s 54EC or not?
urgent reply needed

rajesh Pandey

rajesh Pandey (Expert)
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25 January 2014 A taxpayer who has earned large capital gains is often laid bare to a huge tax burden, unless the proceeds are invested in specified assets within prescribed time. One of the ways to save on long-term capital gain tax is to invest the capital gain in bonds specified under section 54EC of the Income-tax Act, 1961.

Section 54EC of the Act provides that the capital gain arising from transfer of a long term capital asset shall be exempt, if the amount of such capital gain is invested in capital gain bonds issued by Rural Electrification Corporation (REC) and National Highway Authority of India (NHAI) (hereafter referred to as the Specified Bonds) within six months from the date of the transfer of the subject capital asset. The amount of exemption would be equal to the amount of capital gain or the amount invested in the Specified Bonds, whichever is lower.

Proviso to section 54EC(1) of the Act, which was inserted by the Finance Act, 2007 with effect from April 1, 2007, provides that investment made in the Specified Bonds by a taxpayer during any financial year (FY) shall not exceed Rs. 50,00,000.

Since the Investment needs to be done within six months of transfer of assets and in current scenario it is done after 11 months hence benefit of section 54ec is not applicable.

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