Exemption u/s54ec capital gains-clarification!!

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 05 September 2011

as the limit was 50 L for invest under the sec, balance was the taxable

however follow the permission granted by incometax, in which they have mentioned the things specifically.

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valji (Accounts manager-MBA) (2150 Points)
Replied 05 September 2011

AGREE WITH MR SHRMA LIMIT FOR bond is 50L FOR SAVING CAPITAL GAIN & IT SHOULD BE WITHIN 6 MONTH FROM THE DATE OF SALE

YOU HAVE TO PAY TAX ON BALANCE AMT

1 Like

Mihir (Wealth Manager) (5293 Points)
Replied 05 September 2011

You could have deposited remaining 50L in capital gain scheme to save tax instead of FD.

Is it possible to deposit 50L in capital gain scheme in the first year, in the second year withdraw the money and invest in 54EC bonds? Since only 50L is allowed to be invested in 54EC in a financial year. Will it save tax, because I think before withdrawal, the assessee has to obtain approval from the ITO?

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CA SOURAV KUMAR GANDHI (B.com (H), CA ) (133 Points)
Replied 05 September 2011

As per Sec 54 EC if capital gain arising on TRANSFER OF LONGTERM CAPITAL ASSET is invested in SPECIFIED LONGTERM CAPITAL ASSET (NHAI, and RURAL ELECTRIFICATION BONDS redeemable after 3 years) within 6 months from the date of transfer the assessee will be eligible for exemption u/s 54EC to the extent of Rs. 50 lacs IN A FINANCIAL YEAR.

For the assets which are compulsorily acquired u/s 45(3)(4) the date within which the amount is to be invested shall be counted from the date of receipt of compensation from govt. i.e. within 12th April' 08.

The limit of Rs. 50 lacs is for a FINANCIAL YEAR. Therefore if you have invested Rs. 50 lacs in F.Y. 07-08, and another Rs. 50 lacs in F.Y. 08-09, then only you will be eligible for exemption of Rs. 100 lacs and that too if both of these investments fall within said 6 months i.e. within 12th April' 08 in your case. (i.e. you can invest only a sum of Rs. 50 lacs upto 31.3.08 and another sum after 01.04.08 but before 12.4.08.

@ MIHIR: The provision of CAPITAL GAIN DEPOSIT SCHEME (CGDS) is applicable for Sec. 54, 54B, 54D, 54F, 54G, 54GAA. but it is not applicable for exemption u/s 54EC. For claiming exemption u/s 54 (all) you need to comply with the investment criteria within due date of filling return. for all section other than 54EC you can claim exemption by depositing amount in CGDS, pending investment. For 54EC: suppose your date of receipt of compensation is 28.3.08, then you can invest the sum within 6 months i.e. 28.9.08, but for 54EC CGDS provision is not applicable then you can go for below mentioned alternatives :

i) File belated return.

ii) File return and then revised it after making investment before 28.9.08

*** Hope you all guys are now clear enough in respect of the provisions of SEC 54EC.

Thanks & Regards

SOURAV GANDHI

2 Like

CA Saranya (Practicing Chartered Accountant) (329 Points)
Replied 06 September 2011

The above case in detail :

In the FY 2007-08 (Oct 12, 2007), an individual has received a total sum of Rs.115 lacs for two properties from govt. for compulsory acquisition of land. (Rs.57.5lacs and Rs.58.5 lacs).

In that year he has applied for rural rectification bond for Rs.100 lacs (2 bonds of Rs.50lacs each).

But they have been allotted only one bond (Rs.50 lacs).

The balance Rs.50 lacs has been deposited in SBI Fixed deposit. For the remaining Rs.15lacs he paid capital gains tax and filed the return (but not on due date).

The next Rs.50lacs bond was issued to him during the next financial year (02.06.2008). But in the month of March (26.03.2008) we have given a request to the income tax dept. saying that the bank is not allotting bonds more than Rs.50 lacs for which we got a reply on 04.04.2008 stating that you can go for bond.

The above said bond has been purchased by cancelling the Fixed deposit.

Now the Income tax officials are demanding for capital gains tax for remaining Rs.50 lacs in the FY 2007-08 (note :they have allowed the same as exemption in FY 2008-09 as per our claim through IT return for the year)

Pls solve this...

Thanks for your time...:):)

CA PRAVEEN SINGH (MANAGER ACCOUNTS) (2277 Points)
Replied 06 September 2011

My dear friend we read your question both.

As per provision of Sec 54EC,assessee can claim exemption under this provision,where the capital gain arises from the transfer of a long term capital asset,and assessee has,any time within the period of six month after the trensfer,invested the whole or any part of capital gains in the certain bonds..

so that rule of investment in 6 month or before from the date of sale.,no limit of amounts, as above wording used.

as u applied 5o lacs bond,& alloted,but second is not alloted,as u said next time.

so u can claim exemption of 50 lack only under thie sec.for asessment year 2008-09

1 Like

nagababu.arevarapu (article student) (27 Points)
Replied 19 July 2014

GOOD EVENING SIR

I HAVE ONE DOUBT IN SECTION 54EC,MR.A SALE ON LAND AT 28/03/2013 HE WAS DEPOSIT IN SPECIED BONDS UP TO 5000000 BUT HE WAS RETURN LAST DATE 31/07/2014,HE WAS SHOW IN RETURN TAXBLE IN CAPITAL ASSETS OR NOT SHOWN IN RETURN

PLEASE GIVE ME SOLUTION.