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Exemption U/s 54EC

Gargi Ranade (CS) (619 Points)

26 February 2011

Dear All,

Section 54EC talks about capital gain not to be charged on investment in certain bonds .

Provision states that within 6 months from asset is transfered , the assessee should invest the whole or part of capital gain in NHAI or REC bonds however assessee can invest during any financial year to the extent of Rs. 50 lacs .

My query is - if persons capital gain comes to 2 cr. then can he invest 50 lacs in one F.Y. & 50 Lacs in another F.Y. within 6 months from the date of transfer?

if not what is intention of provision in adding words in F. Y.

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17 Replies

Pankaj Arora (Learner) (3134 Points)
Replied 26 February 2011

no. you can invest in bond only 50lakh u/s 54EC

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sachin sharma (article) (122 Points)
Replied 26 February 2011

hi gargi ranade,

u cant invest more than rs 50 lacs in one f.y in these bond these otherwise the portion of amount exceeds rs 50 lacs will be taxable.

n ur intention to invest rs. 50 lacs in current f.y and rs. 50 lacs in next f.y is wrong as rs 1.5 crore (2 cr-50 lac) will become taxable on 31st march.

CA. ANKUR JAIN (CA.....) (2800 Points)
Replied 26 February 2011

Yeah you can invest 50 lack in one f.y and 50lack in next f.y to get the benifit of Rs. 1cr..........

but both investments should be with in 6 months of transfer.......

The same question was asked in CA FINAL NOV 10 DT EXAM

you can refer DT NOV 10 NEW COURSE suggested ans for your reference.........

shruti(CA final) (article cleark (completed)) (56 Points)
Replied 28 February 2011

ya ankur is right..u get dud of 1cr...coz..prov..nt..specifies..d amt..it specifies..d period..within..we do..d ..inv..n dis is issue of tax planing..came in ppr..of DNA..

Ramya Kinthali (Financial Consultant) (108 Points)
Replied 28 February 2011

agree with ankur.....

for confirmation suggested answers for nov 2010 paper can be checked where in the clear interpretatio was given by institute for 54EC

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chintan patel (Chartered Accountant) (211 Points)
Replied 28 February 2011

ya deduction upto RS. 1 crore can b claimed if the investment is made within 6 months of the CG transaction....

you can refer suggested answer of CA final new syllabus exam of NOV 10...same question was there in the exam and as per institute's suggested answer u/s 54EC 1 crore deduction is allowed...

Lifins Financial (Owner) (41 Points)
Replied 08 April 2011

REC / NHAI 54EC Capital Gains Tax Exemption Bonds -2011-2012 Application Form

For More Details and investment

visit on www.lifins.in or call on 9822403407

- Lifins Financial, Pune, Maharashtra, India.

A] Rural Electrification Corporation (REC)

About Company:

Rural Electrification Corporation (REC), was incorporated on July 25, 1969 under the Companies Act 1956. REC is a wholly owned Government of India Public Sector Enterprise with a net worth of over Rs. 11104.25 Crore as on 31-03-2010. Its main objective is to finance and promote rural electrification projects all over the country besides providing assistance for generation projects, transmission and distribution projects. It provides financial assistance to State Electricity Boards, State Government Departments and Rural Electric Cooperatives for rural electrification projects as are sponsored by them.

B] National Highways Authority of India (NHAI)

About Company:

The National Highways Authority of India was constituted by an act of Parliament, the National Highways Authority of India Act, 1988. It is responsible for the development, maintenance and management of National Highways entrusted to it and for matters connected or incidental thereto. The Authority was operationalized in February, 1995 with the appointment of full time Chairman and other Members.

National Highways Authority of India (NHAI) is mandated to implement National Highways Development Project (NHDP) which is

· India 's Largest ever highways project

· World class roads with uninterrupted traffic flow

The National Highways have a total length of 70934 km to serve as the arterial network of the country. The development of National Highways is the responsibility of the Government of India.

Salient Features:

v Interest payment: Annual

v Coupon rate : 6.00% payable annually.

v Interest Payment: Payable on 31st March

v Maturity: 3 years from Deemed Date of Allotment

v Redemption: Bullet, at the time of Maturity after 3 years

v Credit Rating : “ AAA/Stable” by CRISIL and “ AAA(ind)(Affirmed)” by Fitch Ratings

v Face Value: Rs. 10000/- per Bond

v Issue price : Rs. 10000/- per Bond

v Minimum application size : 1 Bond of Rs. 10,000/-

v Maximum application size: 500 Bonds of Rs. 10,000/- each

v subject to fulfilment of other conditions as specified in Income Tax Act.

v Mode of Subscripttion: 100% on application

v Deemed Date of Allotment: Last day of each month for application money cleared and credited in collection account.

v Transferability: The Bonds are non-transferable, non-negotiable and cannot be

v Offered as a security for any loan or advance

v Date of Allotment : At the last day of every month

v Date of Start: 01.04.2011

v Date of Closure: 31.03.2012

v Applicable Laws: Income Tax Act 1961

v Mode of payment: by A/c Payee cheques or DDs.

The following persons and institutions can apply for these bonds:

Individual/ HUF/ Charitable Institute / University/ Company/ Mutual Funds/ Firms / NRI / Co-operative / NRI / Financial Institute

-----------------------------------------------------------------------------------------------------------------

For More Details and investment

visit on www.lifins.in or call on 9822403407

- Lifins Financial, Pune, Maharashtra, India.

Pallavi Kapase (Student) (27 Points)
Replied 23 February 2012

Please anyone give referance of case in which exemption u/s 54EC is allowed more than Rs. 50 lacs.....

RAKESH JAIN (RETIRED COMPUTER PROFESSIONAL) (369 Points)
Replied 24 August 2012

Dear All,

If , for example, a house property is sold in April with a Long Term Capital Gain of Rs. 55L & one invests Rs. 50L in REC 54EC Bonds, how much exemption he/she can claim on LTCG? The reason why I am asking this question is that he/she must invest full LTCG in 54EC Bonds to get exemption on full amount of LTCG but can not invest more than 50L in a Financial Year. As this investment must be done with in 6 months of sale he/she can not invest balance 5L in 54EC Bonds in next FY (Apil is not proper time for saling property from this point of view). So, in this situation will he/she get exemption on full invested amount 50L or proportionately i.e. on 50X50/55? Kindly suggest. Thanking you in advance. Best regards, RAKESH

supernova (M.D.) (59 Points)
Replied 25 August 2012

i understand thhat the tax on the interest from this investment is taxable .

Would that interest income come under regular income tax head or capital gain tax ?

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R M SHAH (CA) (43 Points)
Replied 25 August 2012

he/ she gets exemption on full amount invested u/s 54EC.

R M SHAH (CA) (43 Points)
Replied 25 August 2012

interest income will be taxable under the head income from other sources.

RAKESH JAIN (RETIRED COMPUTER PROFESSIONAL) (369 Points)
Replied 25 August 2012

Thanks. Best regards, RAKESH

RAKESH JAIN (RETIRED COMPUTER PROFESSIONAL) (369 Points)
Replied 26 August 2012

Dear All,

Thanks for replying my earlier question on investing in 54EC bonds & tax exemption. Now, I have following queries:

1. If I am in 30% bracket of taxation, how will I show in ITR form that tax on LTCG (calculated on the basis of indexation ), after exempting 50L invested in 54EC bonds, is being calulated at @ 20%?

2. Some body told me that I must pay this tax (on LTCG) before 15 September as sale took place in April. Is this true? If yes, then how do I pay this tax before Sep 15 as I need not pay Adavance Tax, effective from FY 2012-13, being a Senior Citizen ?

Thanking you all in advance. Best regards, RAKESH