capital gains

The One Says:

Section 54EC of Income-tax Act, 1961, provides tax exemption on capital gains arising from the transfer of a long-term capital asset, if such capital gains are invested in the notified bonds of Rural Electrification Corporation Ltd. (REC) and National Highways Authority of India (NHAI).

Initially, Vide notifications dated 29.6.2006, REC and NHAI were allowed to issue bonds for Rupees 4,500 crores and Rupees 1,500 crores respectively during Financial Year 2006-07. Since these bonds were fully subscribed to in August, 2006, the Central Government, vide notification dated 22 nd December,2006, has allowed REC to issue additional bonds for an amount of Rs. 3,500 crores during the period from 26 th December, 2006 to 31 st March, 2007, subject to the following conditions:-

(i) a person who has made an investment of an amount aggregating more than fifty lakhs rupees in the bonds of REC and NHAI notified on 29.06.2006 shall not be allotted any bond out of bonds of Rs. 3,500 crores.

(ii) in case of any other person, the aggregate of investment in the bonds of Rs. 3,500 crores and the investment, if any, in the bonds of REC and NHAI notified on 29.06.2006 shall not exceed fifty lakhs rupees.

Further, with a view to removing the hardship caused to taxpayers because of non-availability of the bonds, the Central Board of Direct Taxes, has issued an order under section 119(2)(c) of Income Tax Act, 1961 on 26.12. 2006 extending the time limitation for making the investments under section 54EC up to 31.3.2007 in case of persons where the long-term capital asset was transferred between 29.09.2005 and 30.09.2006 (both dates inclusive).

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