Sec 54EC LTCG Exemption

This query is : Resolved

Rajat (Querist)
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05 February 2010 Long Term Capital Asset sold in Dec'09 and booked LTCG of Rs 1 crore.

Is it legally allowed to claim the exemption of full 1 crore by investing 50 lac in 2 financial years.

For eg - 50 lac invested in Feb'10 and another 50 lac invested in May'10 and claim exemption u/s 54EC in two financial years

As per the IT act they have stated 2 conditions for claiming exemption u/s 54EC

First condition - LTCG should be invested within 6 months

Second condition - max limit for exemption is 50 lac in one financial year.

So, can we claim 1 cr exemption of LTCG in two financial year (although LTCG is earned in year)

Can the accessing officer disallow the exemption, if claimed in such manner.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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05 February 2010 One crore can be spread over to two years vide the clarification in http://www.simpletaxindia.org/2009/02/capital-gain-54b54ec54f-combined.html

But I feel that if the assessee prefers to do so by availing the celing of Rs. 1 crore by investing Rs 50/- lakhs each in two financial years,it would mean that the law gives an additional benefit for those who postpone the transaction to the last quarter of the financial year thereby creating an adventurous situation inviting the risk of rejection by the income tax department.

Rahul Vora

Rahul Vora (Expert)
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06 February 2010 You can claim 1 cr exemption of LTCG in 2 financial years. I can say that this tax planning within the law. And if you satisfy both the above conditions, then no one can stop you.

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