annamalai (Partner) (97 Points)
01 November 2013I am about to sell my immovable property for Rs135.00lacs and the index rate is only around Rs .20.00 lacs (LTCG) and I don't want to purchase house property how I can avoid tax , is u/s 54EC maximum investment is Rs50.00 lacs I wish to deposit entire sale proceedings what are the methods - my status NRI
VIKASH KUMAR JAIN
(Audit Executive)
(711 Points)
Replied 01 November 2013
Mihir
(Wealth Manager)
(5293 Points)
Replied 02 November 2013
If you want to avail exemption u/s 54EC, you are required to purchase bonds within 6 months from the date of sale. The lock-in period is 3 years.
There are REC and NHAI bonds eligible for 54EC exemption.
CA Pallav Singhania
(IT System Auditor)
(33052 Points)
Replied 02 November 2013
I'm totally Agree with Vikash ji,
Its a normal practice,
To claim exemption u/s 54EC you can invest max 50 lacs within six months...
But if you do sell your property Now, then you can Invest 50 lacs in 54EC now and 50lacs in April..
However, you can claim exemption U/S 54GB too...
No Capital Gains Tax on transfer of residential property if invested in manufacturing small or medium enterprise.
As per the Finance Act, 2012 a new section 54GB has been added in the Income-tax Act which provides relief from re-investment of sale consideration in the equity of a new start-up SME company in the manufacturing sector which is utilized by the company for the purchase of new plant and machinery.
annamalai
(Partner)
(97 Points)
Replied 04 November 2013
| Originally posted by : Aryan Singhania (Pallav) | ||
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Dear aryan Singhania thanks for your reply , but I read from case laws , the dept had not accepted such investments and later on appeal with HC , approved by high court and further an amendment was passed THAT max 50 lacs is applicable (I will send the details of case history in the following mail) my other idea if I can invest in 2 different bonds of each 50 lacs one in the name if seller and another in the name of his son , after gifting him the above amount , as I pursued the act says you should invest in Bonds is it correct regards
annamalai
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Rahul Singhania
(Sr. Executive)
(167 Points)
Replied 04 November 2013
Mr. Annamlai, I think Aryan is correct and also I want to update you :
“Capital Gains – Limit of investment in specified bonds (REC/NHAI) being restricted to Rs. 50 lakhs per Financial Year” Background:Under section 54EC of the Income Tax Act, 1961, any person who has earned Capital Gains on sale/transfer of a Long Term Capital Asset can invest the consideration received on such sale in specified bonds (REC/NHAI) and claim deduction from Capital Gains subject to certain conditions. The conditions are that the amount should be invested within 6 months of the sale/transfer date and the upper limit of investment is Rs. 50 lakhs in any financial year.Till now, the transactions were being planned in such a way that the period of six months would cover the current as well as the next financial year (e.g. transaction dated 1st December, 2011 – validity of six months would mean that the amount can be invested upto 31st May, 2012). Due to this form of tax planning, the investors would be able to claim a deduction of Rs. 100 lakhs instead of Rs. 50 lakhs if the investment of Capital Gains was made in two tranches. (1st 50 lakhs before 31st March, 2011 and next 50 lakhs after 31stMarch, 2011 in above case).Judgment delivered by ITAT Jaipur bench:As per a recent judgment delivered by Jaipur bench of ITAT (ITAT is a adjudicating authority constituted specially to hear tax related matters. For cases dismissed by ITAT, generally an appeal can be made to High Court and then the Supreme Court in that order), an investor was denied the benefit of claiming Rs. 50 lakhs deduction twice even though the investments were made in two different Financial Years.Conclusion:This judgment has made it clear that there cannot be two different interpretations of Section 54EC. Assessees can get a maximum deduction/benefit of Rs. 50 lakhs u/s 54EC
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