Sec 54EC LTCG Exemption

Dear Kunal,

The heading/title of ur query speaks about 54EC, in this section exemption is available on investment in notified Bonds upto Rs. 50 Lacs within 6 months from the date of sale of an asset (Plot in present case)

But ur queries are related to buying a new house which is covered by Sec 54F - It is not necesaary to pay the entire amount on down payment, only condition is House is to be purchased within 2 years from the date of sale.

The amount which cannot be utilized till the time of due date of filing return of income for the FY in which the plot is sold, is to be deposited in a Capital Gain A/c scheme with the Bank..& Thereafter that amount is to be utilized for buying a new house, any amount which cannot be utlized from the above Capital Gain account shall be taxable on the expiry of 2 years....

Therefore my friend Option of loan is neither acceptable to income tax nor it is  advisable further when one has the money with him why would he borrow & pay interest..............

Dear Kunal....

Sec 54EC talks about Transfer of LTCA and investment in Specified Assets within a period of six months from th date of transfer....

The case which you have given talks about 54F - i.e. Tansfer of LTCA other than Res. house and Pur/const of  Res. house...X sells Plot and pur Res, House....

The CG of 15 lacs can be utilised for Pur of Res. house within 2 yrs / const. 3 yrs...Moreover 54F restricts that the assessee should not own more than one Res. house at the time of transfer....

The case you mentioned X can go for 54EC and 54F....

 X can invest the CG - 54EC - specified bonds wihin six months...The amount not invested in 54EC should be invested in CG scheme A/C within the due date of filing return...

The amount deposited in the CG scheme should be utilised within 2yrs for pur of Res. house / 3 yrs for construction...if not done the amount unutilised will be taxed.....

Thanks Amir and Balaji. It really helped to clear the air on the situation.

apologies for the confusion due to the incorrect reference in the heading of the thread.