Capital gains exemption

Tax planning 760 views 2 replies

Shilpa

Article Asst

35 Points Joined December 2009

I am a temporary resident of a foreign country. I have a plot of land in Chennai in my wife’s name. I wish to sell the land and invest either in Notified bonds u/s 54 EC or in a residential house property.

My question is

1. Let us say my capitals gains is 1.9 cr. Am I permitted to invest 50 lacs in bonds notified u/s 54 EC and balance 1.4 cr in some property? Am I allowed to split the investment like this? Or does the entire 1.9 have to be invested in property alone? Do the rules state that one can EITHER invest in bonds OR invest in PROPERTY, not both?

2. Also, if I choose to invest the entire CG in notified bonds, can I spread the investment in 2 FY but within 6 months from the date of sale of property? Eg. I sell the plot in Jan 2012 and have capital gains of say Rs.1 Cr. Can I invest Rs.50 lacs in FY 11-12 and balance Rs.50 lacs in FY 12-13 and claim these exemptions in AY 12-13 & AY 13-14 respectively. If I choose to do this way,what are the other formalities to be done.

3. Also, do I have to check whether any double taxation agreement exists between India & the country where I am a temporary resident?

Please quote references or section nos. for my reference.

Thank you

Replies (2)

CA.Praveen Ponnappa

CA PRactice

128 Points Joined January 2009

1.As the asset is situated in India it is taxable in India irrespective(deemed to accrue or arrise) of residential status (subject to DTAA if any, if assesee is a non resident).

2. If the land is purchased out of the assets transferred by the husband capital gain is clubbed in the hands of husband otherwise it is taxed in the hands of wife only.

3.Benefit of Sec 54 and Sec 54EC can availed simultaneously, there is no restriction to avail this benefit simultaneously.

4.Investment should be made within 6 months from the date of transfer and investment should not exceed Rs.50 lakh in any financial year so it can be planned like 6 month would fall under 2 financial years.Specified investments as RECL & NHAI bonds redeemable after 3 years. If bonds are transferred or converted within 3 years exempted CG will be taxable in the year of conversion or transfer.Conversion covers loan taken against the secrity of bond.