Ltcg on following situation
This query is : Resolved
13 February 2014
Dear Sirs, Grateful for a clarity on following situation.
a. 1982 - Bought a piece of land in Tamilnadu -for 1500 Rs in total.
b. Jun 2013 - Sold the land for 2900000.
Dec 2013 - Bought another pice of property/land for 1800000
c. Feb 2014 - Willing to Invest this after Indexation which amounts to 800000 Lakhs in Bank Capital Account for 3 or 5 years.
My questions are as follows.
1. I understand that we may need a NOC form Income Tax to withdraw the amount after Maturity. Would this be correct ?
2. Do we have to invest in capital account to avoid paying Tax ? Would we be exempted ?
Thank you
Chandrika
a. 1982 - Bought a piece of land in Tamilnadu -for 1500 Rs in total.
b. Jun 2013 - Sold the land for 2900000.
Dec 2013 - Bought another pice of property/land for 1800000
c. Feb 2014 - Willing to Invest this after Indexation which amounts to 800000 Lakhs in Bank Capital Account for 3 or 5 years.
My questions are as follows.
1. I understand that we may need a NOC form Income Tax to withdraw the amount after Maturity. Would this be correct ?
2. Do we have to invest in capital account to avoid paying Tax ? Would we be exempted ?
Thank you
Chandrika
13 February 2014
You have to invest in Bond as prescribed u/s 54EC and no need to take permission from the Income Tax Department. It is automatically on maturity you are sent with the payment. If you invest by making deposit in Capital Gain account with the bank for investment purpose then against the purchase of the property you can issue the cheque and withdraw the money.
14 February 2014
Thank You Mr.Agarwal...however are we eligible to invest in NHAI or REC now as 7 months has elapsed since sale of the land ? Thanks....Chandrika
17 February 2014
I really would be grateful for a guidance as to whether we can still invest in NHAI the remaining balance after purchasing a property with a sale proceeds of an earlier property even though 7 Months has elapsed since the sale...as of my above query posted on 13 Feb 2014
Thanks
Chandrika
Thanks
Chandrika
03 August 2024
Let's address your queries step-by-step regarding the Long-Term Capital Gains (LTCG) from the sale of land and investment options:
### **1. NOC for Capital Gains Bonds (Section 54EC):**
- **NOC Requirement:** Generally, for investments in Capital Gains Bonds under Section 54EC, you don't need a No Objection Certificate (NOC) from the Income Tax Department to withdraw the amount after maturity. You simply need to ensure that the investment in such bonds is made within 6 months from the date of sale of the property to claim exemption under Section 54EC.
### **2. Capital Gains Investment to Avoid Tax:**
- **Section 54EC:** You can claim an exemption from LTCG tax by investing the gains in specified bonds under Section 54EC. These bonds are issued by NHAI (National Highways Authority of India) or REC (Rural Electrification Corporation) and must be purchased within 6 months from the date of sale of the property. The maximum amount you can invest in these bonds for claiming exemption is Rs. 50 lakhs.
- **Investment Timeline:** Since 7 months have elapsed since the sale of the land, you are outside the 6-month window for investing in these bonds. As such, you cannot invest in these bonds for claiming exemption on the LTCG from the land sale. However, you still have the option to invest in a new residential property.
### **Detailed Analysis:**
1. **Sale of Land and Investment:**
- **Original Purchase Price (1982):** Rs. 1,500
- **Sale Price (June 2013):** Rs. 2,900,000
- **Capital Gain:** Rs. 2,900,000 - Rs. 1,500 (Indexed cost of acquisition) = LTCG
2. **Investment in New Property:**
- **New Property Purchase Price (Dec 2013):** Rs. 1,800,000
- **LTCG Exemption Under Section 54:** If you have invested Rs. 1,800,000 in the new property, you can claim exemption on LTCG to the extent of this investment.
3. **Investment in Capital Gains Bonds (Section 54EC):**
- **Investment Deadline:** You can invest up to Rs. 50 lakhs in these bonds within 6 months of the sale of the property. Since it's been 7 months, this option is no longer available for the current transaction.
4. **Utilization of Remaining Amount:**
- If the remaining balance after purchasing the property is not invested in bonds within the specified timeframe, the LTCG that is not exempted through property purchase or bonds will be taxable.
### **Steps to Follow:**
1. **Review Investment in Property:**
- Verify that the amount spent on purchasing the new property is correctly documented and that the property qualifies as a residential property for exemption under Section 54.
2. **Consider Other Exemptions:**
- Since the investment window for Capital Gains Bonds is closed, focus on ensuring that the full LTCG is exempted by other means, such as investing in a residential property.
3. **Consult a Tax Professional:**
- Given the elapsed time and complex nature of capital gains tax, it’s advisable to consult a tax professional to review your situation comprehensively and explore any potential options or alternative exemptions available.
### **Summary:**
- **NOC Requirement:** No, you do not need an NOC for withdrawal of Capital Gains Bonds after maturity.
- **Capital Gains Bonds:** The investment window has passed (6 months from the date of sale).
- **Property Investment:** You can claim exemption under Section 54 for the new property purchased within the timeframe.
If there are any other specifics or further questions, consulting a tax advisor will help in addressing them comprehensively.
### **1. NOC for Capital Gains Bonds (Section 54EC):**
- **NOC Requirement:** Generally, for investments in Capital Gains Bonds under Section 54EC, you don't need a No Objection Certificate (NOC) from the Income Tax Department to withdraw the amount after maturity. You simply need to ensure that the investment in such bonds is made within 6 months from the date of sale of the property to claim exemption under Section 54EC.
### **2. Capital Gains Investment to Avoid Tax:**
- **Section 54EC:** You can claim an exemption from LTCG tax by investing the gains in specified bonds under Section 54EC. These bonds are issued by NHAI (National Highways Authority of India) or REC (Rural Electrification Corporation) and must be purchased within 6 months from the date of sale of the property. The maximum amount you can invest in these bonds for claiming exemption is Rs. 50 lakhs.
- **Investment Timeline:** Since 7 months have elapsed since the sale of the land, you are outside the 6-month window for investing in these bonds. As such, you cannot invest in these bonds for claiming exemption on the LTCG from the land sale. However, you still have the option to invest in a new residential property.
### **Detailed Analysis:**
1. **Sale of Land and Investment:**
- **Original Purchase Price (1982):** Rs. 1,500
- **Sale Price (June 2013):** Rs. 2,900,000
- **Capital Gain:** Rs. 2,900,000 - Rs. 1,500 (Indexed cost of acquisition) = LTCG
2. **Investment in New Property:**
- **New Property Purchase Price (Dec 2013):** Rs. 1,800,000
- **LTCG Exemption Under Section 54:** If you have invested Rs. 1,800,000 in the new property, you can claim exemption on LTCG to the extent of this investment.
3. **Investment in Capital Gains Bonds (Section 54EC):**
- **Investment Deadline:** You can invest up to Rs. 50 lakhs in these bonds within 6 months of the sale of the property. Since it's been 7 months, this option is no longer available for the current transaction.
4. **Utilization of Remaining Amount:**
- If the remaining balance after purchasing the property is not invested in bonds within the specified timeframe, the LTCG that is not exempted through property purchase or bonds will be taxable.
### **Steps to Follow:**
1. **Review Investment in Property:**
- Verify that the amount spent on purchasing the new property is correctly documented and that the property qualifies as a residential property for exemption under Section 54.
2. **Consider Other Exemptions:**
- Since the investment window for Capital Gains Bonds is closed, focus on ensuring that the full LTCG is exempted by other means, such as investing in a residential property.
3. **Consult a Tax Professional:**
- Given the elapsed time and complex nature of capital gains tax, it’s advisable to consult a tax professional to review your situation comprehensively and explore any potential options or alternative exemptions available.
### **Summary:**
- **NOC Requirement:** No, you do not need an NOC for withdrawal of Capital Gains Bonds after maturity.
- **Capital Gains Bonds:** The investment window has passed (6 months from the date of sale).
- **Property Investment:** You can claim exemption under Section 54 for the new property purchased within the timeframe.
If there are any other specifics or further questions, consulting a tax advisor will help in addressing them comprehensively.
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