Dear Friends,
I have read the section 54EC posts with great interest. I understand the benefits of the NHAI, REC Bonds for LTCG tax relief. However, none of the examples cited deal with the scenario where the LTCG exceeds 50 lakshs, other than to mention that if the date of sale is after October 1, it is possible to invest in upto 1 crore of tax-free bonds, before and after March 30th.
I have a point on which I am rather confused and would greatly appreciate the wisdom of this community.
The question is simply this:
I sold a flat in Aug 2011 which resulted in an LTCG of Rs. 117 lakhs approx. If I invest 50 lakhs in 54EC bonds, which is the max allowable, the question is, what is my taxable LTCG?
I was under the impression that the taxable LTCG was simply Rs. 67 lakhs, i.e. 117-50 lakhs. My CA is advising that actually, my taxable LTCG is higher, as per the following formula:
117 – (50/117)*50 = 96 lakh approx.
He cites section 54EC (1)(b).
This section reads as follows:
(b) if the cost of the long-term specified asset is less than the capital gain arising from the transfer of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of acquisition of the long-term specified asset bears to the whole of the capital gain, shall not be charged under section 45 :
I simply want to double check if this is indeed the right amount, i.e. 95 lakhs vs 67 lakhs? Please advise.
CAclubindia
