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Long Term Capital Gains Tax

Jayanthi Vinayakarao (Consultant) (21 Points)

19 September 2019

Hello Sir,

My Late Father's property is sold and i got 28% of the share from the sale amount on 4th July 2019. I have planned to invest the money in the tax saving bonds. Till Auditor gives the final taxable amount, can i keep the money in FD? How long I can keep the money in FD? Please advice.

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19 Replies

ravi (student) (44 Points)
Replied 19 September 2019

Must be deposit with in capital gain account in scheduled Bank upto buy buy the bonds

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Kapadia Pravin (17264 Points)
Replied 19 September 2019

It is mandatory to invest in capital gain bonds (you may say tax saving bonds) within 6 months from the date of sale of property (Under 54EC)

Such 54EC bonds are issued by NHAI REC NHB

sabyasachi mukherjee (27732 Points)
Replied 19 September 2019

Jayanthi there are two options:
1.invest in infrastructure bonds within a period of 6 months from the date of sale.
2. invest in residential house property within 6 months of the date of such sale(.sec 54F)

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 19 September 2019

Till the period of 6months gets lapsed and your auditors confirmation is before that, you can keep invested the amount in FD say for 5months, after which you have to liquidate it to invest in 54EC bonds

Kapadia Pravin (17264 Points)
Replied 19 September 2019

@ Jayanthi
Note that you are required to invest in 54EC bonds only to the extent of Long Term Capital Gain ----and -----not the whole 28% share in consideration.

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Vikas Sharma (4 Points)
Replied 19 September 2019

https://insuringgurgaon.com/blog/loan-against-lic-policy/

Suresh Thiyagarajan (Student) (3986 Points)
Replied 19 September 2019

1. The above transaction will result in Capital gain tax and it will be restricted to your share in the property.
2. If you have decided to invest in tax saving bonds which is National Highway Authority of India (NHAI) and Rural Electrification Corporation of India (REC) it should have been made within a period of 6 months from the date of sale.
3. In your case, 6 months from 4th July 2019 ends on 4th January 2020. So investment should be made within this date. It would be advisable to deposit the amount into Capital Gains Accounts Scheme (CGAC) in type A account (savings) and invest the amount from there to bonds u/s 54EC. It should be noted that only the capital gain on sale of such property should be invested into bonds and not the entire sale proceeds.
4. From the above action, there will not be any problem as withdrawal from Type A account of CGCS as it has no restrictions. Interest rates are notified by RBI from time to time for this type of account.
Please correct me if the above solution has an alternative view.

Kapadia Pravin (17264 Points)
Replied 19 September 2019

@ Jayanthi
For 54EC - time period is within 6 months that means you should invest before 4-1-2020.

Since both the dates ( sale and Investment) fall in the same FY 2019-2020, there is no need to go for CGAS ( as such CGAS is not to be used when you go for 54EC)

Actually when you intend to invest in bonds under 54EC, CGAC is not to be used.

CGAC is required only when assessee wants to take re- investment benefit under 54, 54F.

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 19 September 2019

Cgas is also used for 54EC bonds. if assesse us not able invest in bonds before due date if return then he needs to deposit in cgas then after that need to deposit in bonds provided 6 month period has not elapsed

suraj aneja (18 Points)
Replied 20 September 2019

I had one query that I sold one commercial property so in which section i can claim exemption 54 or 54F ? CAN ANYONE CLEAR MY QUERY ?

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Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 20 September 2019

You can claim exemption under 54F, by investing the entire sale proceeds in residential property

1 Like

suraj aneja (18 Points)
Replied 20 September 2019

But the property i sold is used only for investment purposes not for business ?

Giridhar S Karandikar (Team Lead) (7548 Points)
Replied 20 September 2019

Whatever may be the nature, that doesn't matter. section 54F clearly states exemption can be claimed on any property other than residential property

1 Like

suraj aneja (18 Points)
Replied 20 September 2019

Ok thanks,but tell me one more query that can i invest that amount in commercial property again to claim exemption u/s 54 f ? Bcoz in Income Tax Act there is no definition of any residential property.