13 November 2010
Dear Sir, I am selling my flat and expect to receive the full and final payment in December 2010.I would like to know if i use the amount of Capital gains before 31.07.2011,then i think i do not have to open a capital gains account in a bank.Am i correct? Secondly what are Govt.Bonds as someone advised me to invest the amount in this scheme if i am not interested to purchase another property.please clarify. Thank You. With regards Arun Sharma kalia1961@gmail.com
14 November 2010
Sir, You are correct. If you are not interested to purchase another property then you may invest the amount of Capital gain in Govt Bonds. The time limit is 6 months from the date of sale deed of your flat. These bonds are redeemable after a period of 3years. These bonds are issued by National Highway Authority of India and REC.
14 November 2010
I would like to add some more details to Paras bafna.
Sec 54 EC of Income Tax Act,1961 deals with Investment in Bonds. NHAI/REC - National Highway Authority of India / Rural electrification Corporation LTd.
The conditions are 1.This exemption is available only for LONG TERM CAPITAL ASSETS transfered, not available for Short term Capital assets. 2.Maximum amount of investment in this bonds is Rs.50 Lakhs.
The amount of exemption is least of actual investment made in Bonds or Actual capital gains.
14 November 2010
Capital Gain Bonds Investments in bonds issued by National Highway Authority of India (NHAI) and rural electrification corporation (REC) are at present eligible for capital gains tax savings. Gains made out of a transfer need to be invested in the above bonds within six months of sale capital assets in order for the proceeds of such sale to be exempt from capital gains tax. These bonds are available on an tap basis, i.e., continuously open for sale.
MINIMUM INVESTMENT: Minimum investment for Rs 10000 for NHAI bonds. For REC, each bond has a face upper limit for investments in the above instruments. MAXIMUM INVESTMENT: Maximum investment in these bond is Rs. 50,00,000. Any excess gain would be taxable however in a better tax planning way we can maximize your saving to Rs. 1,00,00,000.
INTEREST: In REC bonds, interest is paid @ 6%. An NHAI bond carries a coupon rate of 6 %. Interest is payable every year.
MATURITY: The maturity of bonds is at the expiry of 3 years in case of NHAI, with a lock in period of 3 years as specified under section 54EC of the Income Tax Act, 1961.
LOAN FACILITY: This because instruments under section 54EC of the Income Tax Act, 1961, cannot be offered as security for a loan.
CREDIT QUALITY: The bonds are rated AAA by credit rating agencies, denoting maximum safety on your investment.
TAX IMPLICATIONS: The main feature of the REC/NHAI bonds is that you can claim Capital Gains Tax benefits benefit under section 54EC of the Income Tax Act, 1961. If you have realised any long term capital gains, you can avoid paying tax on it by investing the gains in the REC and NHAI bonds. Such gains have to be invested within 6 months of realizing the same and the investment has to be locked for a minimum period of 3 years. However, the interest will accrue on this investment is taxable.
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