Bonds u/s 54EC

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Please Clarify if the assessee purchases the bonds u/s 54 EC to avail the benefit of exemption, then wether the same bonds can be given as security against Overdraft account or Loan obtained? whether O/D or loan can be obtained aginst the same? would it amount to trasfer and the capital gain exemption would be withdrawn?

Replies (4)

raj

service

23 Points Posted on 30 December 2008

specified asses u/sec.54EC converted into money or any loan/advances is taken of security of specified assets within 3 yrs from the date of acquisition , the amt of capital gain arising from the transfer of original assests which was not charged to tax, will be demmed income by way of long term capital gain in the p.y in which specified assets transferred.

Pavan Jain S

Chartered Accountant

1575 Points Posted on 30 December 2008

Offering of specified assets as a security for any loan amounts to conversion of the specified assets into money.. the CG which was not charged to tax earlier will be deemed to be the CG for the current year

HARSHIT KABRA

STUDENT

81 Points Posted on 02 January 2009

As per the provisions of sec.54EC, if the assessee offers the bonds as security or convert the same into money or laon within a period of 3 yeara from the date of acquisition, it will amount to transfer and capital gains tax shall be attracted.

Nikhil Kumar

CA Qualified CPA

910 Points Posted on 02 January 2009

Quoting the exact portion of sec 54ec relevant to the query-

'(2) Where the long-term specified asset is transferred or converted (otherwise than by transfer) into money at any time within a period of three years from the date of its acquisition, the amount of capital gains arising from the transfer of the original asset not charged under section 45 on the basis of the cost of such long-term specified asset as provided in clause (a) or, as the case may be, clause (b) of subsection (1) shall be deemed to be the income chargeable under the head Capital gains relating to longterm

capital asset of the previous year in which the long-term specified asset is transferred or converted (otherwise than by transfer) into money.

Explanation.In a case where the original asset is transferred and the assessee invests the whole or any part of the capital gain received or accrued as a result of transfer of the original asset in any long-term specified asset and such assessee takes any loan or advance on the security of such specified asset, he shall be deemed to have converted (otherwise than by transfer) such specified asset into money on thedate on which such loan or advance is taken'

Hope this would clear everything