d. Capital Gains Income
My capital gain is worked out at an amount more than actual profit I earned in the sale of my asset because of application of section 50C of the Income tax Act. Am I eligible for exemption of such deemed capital gains in entirety?
Yes. Where capital gain is assessed on notional basis under section 50C, whatever amount is invested in new residential house within prescribed period under section 54F would get benefit of deduction irrespective of fact that funds from other sources ...
Can exemption can be claimed u/s 54 and 54F when capital gains from transfer of multiple properties are invested in a single residential property?
If other conditions as regards time limit etc. are fulfilled, exemption under section 54 is allowable where capital gains arising from sale of two residential houses are invested in a single residential house.
Can I claim exemption u/s 54EC & 54EE along with section 54?
Yes. You can claim exemption under all these sections together, but you have to exhaust exemption under section 54 first, since it doesn’t have a ceiling limit which is present in the other two.
How would I calculate the exemption u/s 54F in case only a part of the sales proceeds, and not the whole amount is invested in the residential property?
In this case, the exemption on capital gain will be allowed in proportion to the sales proceeds invested in residential property, i.e. Exemption Amt = Capital gain × (Amount invested/Net Sale consideration).
Is there any relief provided for capital gains arising from sale of any long-term asset which is not a residential property?
Yes, u/s 54F, any gain arising from sale of long-term asset can be tax exempted if the entire sales proceeds are invested in · Purchase of one residential property within one year before or two years after the date of transfer of the asset, or ...
Can the bonds be owned jointly?
Yes, this bond can be held in the name of a single holder as well as jointly. Keep in mind that even if you make separate applications, individually or jointly, the aggregate investment should not exceed Rs. 50 lakh, or both of you may lose the ...
How is the interest earned on these bonds taxed?
There is no tax deductible at source on the interest paid by these bonds. But the interest earned on these bonds is taxable. You will need to pay tax on the interest income as advance tax.
What is the risk in REC/NHAI bond investment?
The bond comes with minimum risk and does not need daily monitoring. Moreover, you do not need to pay a commission to get the bond. The bond also comes with AAA/stable rating by Crisil Ltd and AAA(Ind)/(Affirmed) by Fitch.
What is the tenure of this bond?
The NHAI /REC bond can be fully redeemed at maturity after five years. You cannot transfer these bonds in another person’s name. Also, it is a non-negotiable financial instrument, hence one should not expect to get money by keeping the bond as a ...
What is the Interest rate on such bonds?
Currently, an interest rate (coupon rate) of 6%, payable annually, is being offered on this bond annually on 1st April and final interest is payable at the time of maturity. The interest is taxable.
How much can you invest in REC/NHAI Bonds?
You can invest a minimum of Rs. 10,000 and a maximum of Rs. 50 lakh. The face value is Rs. 10,000 per bond, so you can buy up to 500 bonds.
If I sell my asset situated outside India, can I claim exemption u/s 54EC
Yes, provided you invest the amount in five-year bonds issued by REC/NHAI.
Can I claim benefits u/s 54EC, 54 and 54F at the same time?
The benefits of exemption u/s 54EC can be clubbed with those under either section 54 or 54F but not both.
Is Capital Gains Account Scheme applicable for exemptions u/s 54EC of the Act?
No. It is applicable only to benefits under sections 54 and 54F.
Is it possible to invest more than Rs.50 lakhs in the REC/NHAI bonds?
No. After amendment in the Finance Act (No.2) 2014, it is not possible to invest more than Rs.50 lakhs for benefits under section 54EC of the Act. But you may consider investment u/s 54F or 54.
I wanted to invest in REC/NHAI bonds but they are not available in market at this time and hence I am not able to invest my funds. What to do?
If bonds of assessee’s choice are not available throughout period of six months as provided under section 54EC, time to invest in bonds would get automatically extended till bonds are available in market; and assessee can purchase same and claim ...
I have made investments in REC/NHAI bonds but the date of issue of bonds by REC/NHAI is beyond six months. Am I eligible?
The eligibility for the benefits depends upon the date of payment by you towards investments in REC/NHAI bonds and date of receipt of such payments by REC/NHAI. If they have received your payments within a period of six months, you are eligible for ...
Is this benefit available against Short Term Capital Gains?
No. This benefit can only be claimed against long term capital gains.
What is the time limit within which I have to make investments in the specified long-term asset?
You have to invest in the specified long-term asset within a period of 6 months from the date of sale of original asset.
Is there a ceiling limit on the amount of exemption to be claimed under section 54EC of the Act?
Yes. From Assessment Year 2015-16 onward, this limit is capped at Rs. 50 lakhs.
I have sold a building used for business which was depreciable and the depreciation is claimed by me on the same. Am I eligible for benefits under section 54EC?
Yes. If you have held the asset beyond a period of five years, you are eligible to claim benefits even though the depreciation on the same was claimed by you. This view is supported by numerous decisions of higher judiciary.
Who can claim benefits under section 54EC of the Income tax Act?
Any class of taxpayers satisfying the conditions therein is eligible for the benefits u/s 54EC of the Income tax Act. Unlike section 54 and 54F which are applicable to only individual and HUF assessees, the benefits under this section are available ...
Can I take a loan against these bonds or convert them to liquid within the five years period?
In case these bonds are converted to money or held as security against a loan within five years of investing, then the amount of capital gain which was earlier exempt from tax shall be deemed to be long term capital gain of the previous year and will ...
Can I claim exemption under any other section if the I invest the capital gains from sale of property in any other asset?
Yes. If within six months the assessee invests, the capital gains in long term specified bonds (REC & NHAI bonds) issued by the government for a minimum of five years, then these capital gains will be exempt from tax u/s 54EC. However, the capital ...
I have invested the sale proceeds of a residential house in purchase of a house in the name of me and my wife. Am I eligible for the benefits?
Section 54 does not explicitly state that the purchase to be made or the construction to be put up by the taxpayer should be in the name of the taxpayer. What is material is the investment of the sale consideration in acquiring the residential ...
I have sold my house to a builder in exchange for a new house in a different building. There was no exchange of money or cash in the transaction. Am I eligible for benefits?
Yes. The word ‘purchase’ in section 54 ordinarily means buying for a price or equivalent of price by payment in kind or adjustment towards an old debt or for other monetary consideration. There is no stress in the section on ‘cash and carry’.
I have purchased a flat from the builder through an agreement to purchase. The payments are made as per the stage of construction. I haven't received possession of the flat within two years and I haven't registered a sale deed for purchase of new flat/house from builder. Am I eligible for exemption?
Yes. Agreement to purchase coupled with substantial payments is enough for claim of exemption. The date of possession is more important than the date of sale deed or purchase deed. However, if possession is beyond your control, you can claim so ...
I am getting the house constructed from builder/contractor. Am I eligible for exemption?
Yes. The taxpayer himself may not be required to construct the house.
Can I include the cost of the plot on which I am constructing a new house in computing exemption benefits?
Yes. As per CBDT Circular 667 (dated 18.10.1993), the cost of the plot purchased for construction of a new house can be included for computation of benefits u/s 54 of the Act.
I have sold my residential house and invested the entire proceeds in purchase of a new house from a builder for which an agreement to sale is registered. However, the builder has not given possession of the flat. Am I eligible for benefits?
Yes. The key condition is utilization of sale proceeds for investment in a new residential house. If you could demonstrate that the delayed possession is beyond your control and you have paid substantial amounts to the builder, you are eligible for ...
I have demolished my old residential house and given the plot for development to a developer to construct a residential complex out of which I will receive some apartments. Am I eligible for exemption?
No. Since you have demolished the building yourself and what you sold is actually your rights in the land, you may not be eligible for benefits under section 54 of the Act.
Can I start the construction of a new residential house before I sell my existing house?
In this case, you will not be eligible for exemption under section 54 of the Act.
What is the time limit for construction of a new residential house from the time of sale of original house?
In order to be eligible for the benefit under this section the NEW house must be constructed within a period of THREE years AFTER the sale of original asset.
What is the time limit for purchase of a new residential house from the time of sale of original house?
In order to be eligible for the benefit under this section the NEW house must be purchased within a period of ONE year BEFORE or TWO years AFTER the sale of original asset.
What is the position in case of a sale of a house owned by a firm but which was occupied by partners for residential purposes?
The firm cannot claim the benefit u/s 54. However, if the property owned by a firm was occupied by partners for residence and on dissolution of the firm, partners sell their share of the property, they may exercise the option of benefit under this ...
Is the exemption valid in case of residential house purchased outside India?
No. The section specifically mentions that the new asset being a residential house must be acquired in India.
What is Capital Gains Account Scheme?
If you have a profit from sale of a residential house and you have not invested these profits in another asset before due date of filing return, then such an amount of capital gains needs to be deposited in the Capital Gains Account Scheme before due ...
How should I file my taxes for the year in which I have sold the property, if I have two more years to invest the proceeds for claiming exemption u/s54?
The capital gains arising from the sale of property is taxable in the year that it was sold. Hence you would have to take the decision of investing in the new property before you file taxes for that assessment year, else the capital gain would become ...
What will be the tax treatment if I sell the new property within three years of its purchase?
If the new property is sold within three years from the date of acquisition the, for calculating the capital gains, the cost of acquisition of this new property will be reduced by the amount of capital gain on which the exemption was claimed earlier. ...
What is the time limit for investing the capital gains on sold residential property in a new property?
For claiming exemption u/s54, the capital gains arising from sale of old property must be invested in: Purchase of another residential property within one year before or two years after the transfer of the old property. Construction on a residential ...
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