Sec-54 EC – Exemption on Long Term Capital Gain on investment of Specified Bond

Provisions under section 54EC provide exemption capital gain arisen on transfer of Long Term Capital Assets (whether land or building or both) when the amount is invested in specified bonds.

This article discusses provisions of Sec 54EC of the Income Tax Act.

Tax Exemption

Provisions of Section 54EC

♦ Eligible Assessee – Any Assessee

♦ Conditions to be Fulfilled:

1. There should be transfer of a Long Term Capital Asset being land or Building or Both.

2. Such asset can also be a depreciable Asset holding for more than 36 months.

3. The Capital gain arising should be invested in a long term specified Asset within 6 month from the date of transfer.

4. Long Term Specified Asset = specified bonds redeemable after 5 years, issued on or after 01.04.18 by National Highways Authority of India (NHAI) or by Rural Electrification Corporation Limited (RECL) or any other bond specified by Central Govt.

5. The Assessee should not transfer or convert or avail loan or advance on the security of such bonds for a period of 5 years from the date of acquisition of such bonds.

♦ Quantum of Exemption

Lower of the Following

1. Capital Gains ; or

2. Amount invested in specified bonds.

The Maximum Investment should be <   Rs. 50 Lakhs.

♦ Violation of Condition

In case of transfer or conversion or availing Loan or advance on such bonds before the expiry of 5 years, the Capital Gain exempted earlier shall be taxed as LTCG in the year of violation of condition.

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2 Comments

  1. SUDARSHAN K S says:

    Sir,

    kindly clarify the following points.

    My wife has received share of her ancestral property in the form of DD, from her mother. The property was sold on 10.09.2019. My mon-in-law transferred my wife’s share on 06.03.2021. Now we are in dark regarding how to go ahead with the amount received. The amount was put in Capital Gain account in Canara Bank in my wife’s name. Please guide us properly so that we can proceed further in right path. Till when the amount can remain in capital gains account. If we dont invest some where else, How much would be the tax we shall have to pay to IT department. Thanks, regards, Sudarshan KS

  2. Akshay says:

    Under the LTCG, if a person who is selling a residential plot, who already have a home property in his name, can he invest in another residential home with the capital gains amount?

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