Can I reinvest positive factors from property sale?

I lately bought a home and made a capital acquire of ₹60 lakh. I don’t want to put money into a home property and want to save tax by investing in 54EC bonds. Can I make investments ₹50 lakh in such bonds and pay tax on the steadiness ₹10 lakh?

—Anu

We perceive that you simply intend to speculate the Long-Term Capital Gain (LTCG) from sale of home property (‘Original asset’), in long-term specified asset (being NHAI bonds, REC bonds, PFCL bonds, IRFCL bonds or another bonds as could also be specified by the central authorities) beneath part 54EC of the Income-tax Act, 1961, to say deduction towards such LTCG. In regard to the identical, following related provisions of the Act advantage consideration:

Section 54EC of the Act supplies for exemption towards the capital acquire arising from the sale of a long-term capital asset (being land or constructing or each). This exemption is out there (topic to achievement of specified circumstances) the place the quantity of Capital Gain arising from sale of authentic asset is invested in long-term specified asset inside a interval of 6 months from the date of such switch.

The most funding that may be made by a taxpayer in long-term specified asset for this objective is ₹50 lakh.

The exemption might be obtainable in proportion to the Capital Gain invested. In case, the funding in long-term specified asset is lower than the LTCG (arising from the switch of the unique asset), a lot of the exemption shall be allowed proportionately, i.e., in identical proportion as the price of acquisition of the long-term specified asset bears to the entire of the LTCG.

We perceive that you’ve earned LTCG of ₹60 lakh by sale of the unique asset. Accordingly, chances are you’ll make investments ₹50 lakh in long-term specified asset to say the exemption beneath part 54EC of the Act. An exemption of ₹50 lakh shall be allowed in the direction of such funding.

The steadiness LTCG of ₹10 lakh shall be taxable as per provisions of part 112 of the Act at 20% (plus relevant surcharge and cess).

In case the long run specified property are bought or transformed into cash inside 5 years of its acquisition as relevant, quantity of exemption shall be thought-about to be LTCG for the yr through which such sale / conversion is completed.

Parizad Sirwalla is accomplice and head, world mobility providers, tax, KPMG in India.

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