09 September 2010
Person A has sold a property worth rs 8 lacs in PY 2008-09 & purchases bonds u/s 54EC for the whole amount & claims deduction However in the PY 2009-10 he sells them ( ie before the expiry of 3 yrs) against the requirements of sec 54EC & purchases a land & makes construction of Rs. 700000 & deposits the balance in capital gains My question is that is he eligilble to claim deduction u/s 54 for such investment or else he shall be charged capital gains tax as he sells the bonds before the expiry of 3yrs
11 September 2010
Dear Dhruv, Here, we will discuss two exemptions, i.e., 54EC and 54F.
First, 54EC, because you sold those Bonds before completing 3 years therefore Earlier claimed exemption claimed on the basis of Bonds purchasing will be taxable.
Second 54F, Here,if you purchase new residential house even then you cannot claim any exemption because requirement of 54F is that sold asset should be Long Term Capital Asset, but sold Bonds are Short Term Capital Asset.
16 September 2010
But the point is that I am ready to presume that the bonds are short term Capital Gain but such sale of bond shall give rise to deemed capital gain ie gain on the original asset shall be taxable in that case the stcg on bonds is short term gain while the gain on original asset is long term gain hence therefore if i am selling the bonds on the face value + int accrued till the date of sale I shall not be taxable for STCG also I shall use the LTCG asset money for purchase of new house (as my previous LTC Asset is taxable again) & as such I shall be eligible for the exemption under 54F
CAclubindia
