♦ Where the capital gain arises from transfer of long-term capital asset being land or building or both, and the assessee has, at any time within a period of six months after the date of such transfer invested the whole or any part of capital gains, in the ‘long-term specified assets’, then the capital gain shall be dealt with in accordance with the following provisions of section –
- If the cost of the “long-term specified asset” is not less than the capital gain arising from transfer of asset, the whole of such capital gain shall not be charged u/s 45.
- For Example – Cost of Specified asset is Rs 50 Lakh and Capital Gain is of Rs 40 Lakh, Whole of Rs 40 Lakh shall not be charged to Capital Gains.
- If the cost of the long-term specified asset” is less than the capital gain arising from the transfer of asset, the the cost of acquisition of the “long-term specified asset” shall not be charged u/s 45.
- For Example- Cost of Specified asset is Rs 50 Lakh and Capital Gain is of Rs 75 Lakh, Rs 50 Lakh shall not be charged to Capital gains and balance Rs 25 lakh shall be chargeable.
♦ Provided that the investment made in the long-term specified asset by an assessee during any fiancial year does not exceed Rs 50 Lakh.
♦ Provided further that the investment made by an assessee during the financial year in which the asset or assets are transferred and in the subsequent financial year does not exceed Rs 50 Lakh.
Here are some of the key points from the Section –
1. The deduction u/s 54EC is restricted to only transfer of Land or building or both by Finance Act 2018. It is available to all assessees.
2. The Finance Act 2017 provides that in case of an immovable property being land or building or both, the period of holding should be 24 months or more to qualify as long-term capital asset.
3. “Long-term specified asset” for making any investment u/s 54EC means any bond redeemable after five years and issued by National Highways Authority of India (NHAI) or by Rural Electrification Corporation Limited or any other bond notified by central government.
4. Finance Act 2018 has extended the time period to 5 years , earlier it was 3 years only.
5. An assessee can not claim deduction of more than Rs 50,00,000 of investment made during financial year including investment made in subsequent financial year.
Example: Mr A purchase a house property on 01.04.2001 for Rs 5,00,000. He sells the house on 10.12.2018 for Rs 2,00,00,000. He purchases bonds of NHAI which are redeemable after 5 Years as under: –
(i) On 15.03.2019 – Rs 50,00,000 (FY 2018-19)
(ii) On 15.04.2019 – Rs 50,00,000 (FY 2019-20)
In the above example, The capital gain for Assessment Year 2019-20 shall be as under :
Period of Holding (2001 to 2018) : Long-term
| Sale Price of Asset | 2,00,00,000 |
| Less: Indexed Cost of Acquisition
(5,00,000 X 280/100) |
14,00,000 |
| Long-term Capital Gains | 1,86,00,000 |
| Less: Deduction u/s 54EC | 50,00,000 |
| Net Long term Capital Gains | 1,36,00,000 |
As shown in example, assessee has tried to take double benefit of section 54EC by investing the amount in two different financial years but within six month after the date of transfer. But this planning is nullified by the Second Proviso u/s 54EC.
Finance Act 2018 also provide that if the assessee transfer long-term specified asset or takes any loan or advance on the security of such long-term specified asset within the period of 5 years from the date of acquisition of long-term specified asset, the capital gains arising from the transfer earlier not charged u/s 45 on basis of the cost of “long-term specified asset” shall be deemed to be the income chargeable under the head “Capital Gains” of the Previous year in which the “long-term specified assets” is transferred or converted into money.
For Example in the above case if the Assessee transfers long-term specified asset of Rs 50,00,0000 on let say in the year 2020 which is within 5 year, in that case in the assessment year 2021-22, the Rs 50,00,000 shall be deemed to be income under the head Capital Gains.
Note: Section 45 is the charging section of Capital Gains and it provides as under:
“Any profit and gains arising from transfer of capital asset effected in the previous year shall be chargeable to income-tax under the head capital gains in the previous year in which transfer took place.”
Author Bio
I have sold a house in July’22 and invested in bonds 50 lac in Nov’22 (within six months).
In May’23 i have sold another piece of land and want to invest in 54EC again. Is that possible as 54EC says 50lac limit in current and subsequent financial year.
Sir, One residential plot was purchased in 2002. I want to sale it out in Oct’2021. to save capital gain tax, I want to make investment in April’2022. (within 6 month). As the financial year would change, Kindly advise me whether i can avail text benefit?
Hello! My parents bought a flat in Delhi (through DDA) in 1998 for 7 Lakhs. They are planning to sell the property for 65 Lakhs in 2023. What would be the Capital gains tax? Plan is to invest in REC/NHAI bonds. How do we tell the buyer not to deduct the TDS on all 65 Lakhs? What do we need to provide to the buyer that we are purchasing the Gov. bonds and for him not to deduct the TDS. Any assistance you can provide will be very helpful.
TDS can not be avoided if sale consideration is above 50 Lakh, Buyer have to deduct tds u/s 194I-A at 1% of the sales consideration irrespective of the fact that your making investment u/s 54EC.
Whether LTCG arising out of sale of land can be avoided by investing in purchase of flat or other housing property or not.?
Please confirm part of the capital gain invested in bonds and tax calculated on the remaining part after deducting basic exemption where there is no other income of the assesee
Is s.54EC benefit restricted to sale of land & bldg only or all LTC. Assets transfer ?
My wife have purchased a flat in Dwarka, New Delhi for Rs.20,00,000/-(twenty lacs) in January 2008. Now she sold it for Rs.1,27,00,000/-(one crore twenty seven lcas).. What is the capital gain on this deal?
Does she need to buy a property for total amount? If she does not buy a property, how much is her capital gain amount. Can she buy property after deducting the original cost of the sold property? Does she get more tax benefit over all the original cost? The circle rate of land in Dwarka, New Delhi is approx. Rs.1,28,000/- per sq.mter.
My brother in law sold a flat for Rs.30 lakh in the month February 21 which is purchased in March 2009 ( date of possession). Date of sale agreement(booking) was 2006. What would be net long term capital gain. Pl give the illustration of the calculation
Hi…needed to know if the assessee dies before the five year period and the specified asset gets transferred to his/her legal heir, whether it will amount to “transfer” and liable to be taxed in the hands of legal heir as capital gain? What if the assessee buys the specified asset in joint name of his son or daughter and dies before 5 years?
I got an amount of Rs 2500000 by selling of alanded property cultiveted land which was not purchasef by me but by inheritance I got it . Moreover this land is within panchayet area so LTCG will be imposed on me or not
I have a land for Rs 40 lacs.
Should I invest total 40 lacs in capital bonds or the capital gain arising after defecting the cost of land acquired
Can I invest only partial capital gains amount in 54EC and pay tax on balance amount?
I had sold plot of land in Feb 2020 which was acquired by me in 2012 and capital gains as calculated is Rs. 15,00,000/-. I am a senior citizen and have a meager amt of annual income of Rs 20 thousand only being a housewife. If I invest Rs. 12,00,000/- out of capital gains u/s 54EC by purchsing specified bonds, in that case whether Itax will be deducted on the balance capital gains of Rs 3,00,000/- @ 20% or at the rate I falls under the regular rate under Itax act.
I HAVE INVESTED IN 54EC BONDS . CAN I GET THE LOAN ON THIS AMOUNT
Sales of Land in 3 Years for 60 Lakhs every year is eligible for 54EC deduction of Rs. 50 Lakhs every year?
Hi, can you please confirm if this is a commercial shop sold and we want to invest it EC bond as 54 is not applicable and 54F is not too as there is already 1 flat on the seller’s name + 1 house jointly owned by seller and her son. So in 54EC benefit, can we reduce indexed cost of purchase (2004 bought) + indexed cost of furniture work, enhancements to the shop (2015) to arrive at net consideration value? Please confirm.
Also, would appreciate if you could correct my understanding on applicability of 54F. Much thanks.