Exemption u/s 54 & 54ec on capital gains

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Querist : Anonymous

Querist : Anonymous (Querist)

14 May 2012 Hi,

Mr.X sold his property to Mr Y and Agreement for Sale was registered on 15/03/2012.
Total Sale Consideration say Rs. 50L, recd in installments as follows.
10/03/2012 Rs. 5L
25/03/2012 Rs. 20L
15/04/2012 Rs. 25L

(Consider Total 50L is a Capital gain for convenience)

For Exemption U/s 54 in order to avail the exemption, gains are to be invested before the due date of return u/s 139(1) or deposit in specified bank A/c on or before due date of filing return,
Now my question is to claim Exmpn whether Mr X needs to deposit entire Rs.50L in a specified bank before due date or only Rs.25L as in FY 2011-12 only 25L is credited in his Bank A/c.

For Exemption U/s 54EC Investment should b made within six mths from date of transfer.
In this case How much should be reinvested and till what date ?

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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14 May 2012 First calculate capital gain as follows:

Sale Consideration
Less: Indexed cost of acquisition

This amount shall have to be invested to claim exemption.

As provided in the query that the total capital gain (assumed after providing indexation benefit) is Rs. 50 lakhs.

Section 54 & 54EC - Rs. 50 lakhs shall have to be invested to claim exemption.

If the amount invested is less than Rs. 50 lakhs, the balance amount shall be taxable.

Mihir Doshi

Mihir Doshi (Expert)
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14 May 2012 Dear Expert,

First read the Query property, he is asking something else and you replied something.

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Querist : Anonymous

Querist : Anonymous (Querist)

14 May 2012 Mr. Siddharth,

My query is regarding date of reinvestment

Mr X recd Rs. 25L till 31/3/12 and bal recd in FY 2012-13. Now my question is, What is the due date u/s 54 & 54EC to get full exemption u/s 54 or 54EC and How much he should invest to get full exemption.

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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14 May 2012 Capital gain is taxable in the year in which the asset is transferred, irrespective of the fact whether the amount has been received.

If the total capital gain is Rs. 50 lakhs but the assessee has received only Rs. 25 lakhs till the end of the FY, the WHOLE AMOUNT OF CAPITAL GAIN SHALL BE TAXABLE IN THE CURRENT YEAR ITSELF.

Further, to claim exemption u/s 54, THE WHOLE AMOUNT OF CAPITAL GAIN SHALL HAVE TO BE INVETSED/DEPOSITED BEFORE THE DUE DATE OF FILING THE RETURN OF THE CURRENT YEAR.

To claim exemption u/s 54EC, THE WHOLE AMOUNT OF CAPITAL GAIN SHALL HAVE TO BE INVESTED WITHIN 6 MONTHS OF THE DATE OF TRANSFER.

If the assessee has received part of the sale price next year, the exemption benefit is NOT CARRIED FORWARD.

Exemption can only be availed in the YEAR OF TRANSFER and no other year.

eg. PY 11-12:
1. Total capital gain comes to Rs. 50 lakhs.
2. Amount received by 31.3.12 - Rs. 30 lakhs
3. Amount to be invested/deposited by due date to claim exemption u/s 54 - Rs. 50 lakhs.
4. Amount to be invested within 6 months of transfer to claim exemption u/s 54EC - Rs. 50 lakhs.

P.Y. 12-13:
1. Balance amount received by the assessee.
2. There is no tax impact as the WHOLE CAPITAL GAIN is taxable in PY 11-12.
3. The assessee CANNOT extend the benefit by deferring the receipt of income.

In your case, Mr. X shall have to deposit the WHOLE AMOUNT of RS. 50 lakhs. The fact that he has received only Rs. 25 lakhs makes no difference.
4. Amount to

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Querist : Anonymous

Querist : Anonymous (Querist)

14 May 2012 Thanks Mr. Siddhartha

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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14 May 2012 You are welcome.