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Section 54ec investments

Atul (Others) (71 Points)

14 July 2015

I had 2 LTCG transactions in 2014-15.... one in May and another in August. I bought NHAI bonds (section 54ec) in December. I now understand that the bonds can be used to get section 54ec only if bought within 6 months of the transaction. SO, in my case they will be usable only for the August dated transaction.

My question is: can the 2 transactions be clubbed together for sec 54ec exemption purpose and the NHAI bonds applied to the total LTCG?

If not, is it possible to use part value of the NHAI bonds towards next year's LTCG transaction?

Thanks.

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7 Replies

Kuldipsinh Jadeja (Job) (357 Points)
Replied 14 July 2015

As per the provisions of section 54EC of Income Tax Act, 1961, you have to invest the amount in Bonds within the period of 6 months from the date of transfer of capital asset. However, as per the second proviso to section 54EC(1), the investment made by an assessee in the long-term specified asset, from capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees.

Atul (Others) (71 Points)
Replied 15 July 2015

Thankyou for your reply.

So, I understand, the 6 month constraint applies even if total LTCG is less than 50 lakh rupees.

About my second question: Is it possible to get sec 54ec benefit on a LTCG transfer using NHAI bonds bought (and not used) BEFORE the LTCG transfer? e.g. I bought NHAI bonds this year and did not use them to get any sec 54ec beenfit. Can I use these bonds next fin year for sec 54ec benefit?

Kuldipsinh Jadeja (Job) (357 Points)
Replied 15 July 2015

Total Exemption u/s 54EC cannot exceed Rs.50 lakhs.

As far the bonds are bought within 6 months after the date of transfer but subject to maximum exemption of Rs.50lakhs you can claim exemption u/s 54EC

Atul (Others) (71 Points)
Replied 15 July 2015

If I buy some bonds before selling a LT asset, then that satisfies the 6 month constraint. Can I use those bonds (upto 50 lakhs) to get the sec 54ec benefit?

Kuldipsinh Jadeja (Job) (357 Points)
Replied 16 July 2015

No. The law is very clear about the same, as per section 54EC(1) investment has to be made at any time, within a period of 6 months AFTER THE DATE OF TRANSFER. So if you have bought before transferring long term capital asset you cannot claim exemption.

If you want to refer provisions of section 54EC please refer

https://www.incometaxindia.gov.in/_layouts/15/dit/pages/viewer.aspx?grp=act&cname=cmsid&cval=102120000000036966&opt=&isdlg=1

Atul (Others) (71 Points)
Replied 16 July 2015

Thanks for your help, sir.

Atul

BPAst (others) (209 Points)
Replied 28 July 2015

Whether capital gain on LTCG be deposited in any nationalised bank Fixed deposit to be used later on for construction of house within 3 years from the date of sale. i.e whether Capital Gains Account scheme still relevant:? how does it differ from the general FDs of bank. can someone explain me in this regard. thanks in advance.