Sale of properties: how is LTCG calculated?

How are the long run capital positive aspects (LTCG) calculated in these eventualities:

Scenario 1: I offered a property in February and LTCG was calculated at ₹1 crore.

Can I make investments ₹50 lakh in specified bonds (54EC) or in a residential property within the present monetary 12 months and the remaining quantity in both bonds or one other residential property after April?

Scenario-2: I offered the primary property in March and the second in May and the LTCG was calculated at ₹1 crore ( ₹40 lakh + ₹60 lakh).

Can I make investments ₹50 lakh in bonds (54EC) for the present monetary 12 months and the remaining within the subsequent monetary 12 months? Do I have to calculate LTCG individually for every monetary 12 months and make investments ₹50 lakh or much less within the bonds for every monetary 12 months?

—Name withheld on request

Scenario 1: It is assumed that the property offered was a residential home property.

To declare exemption towards LTCG underneath part 54EC of the Income Tax Act, 1961, you would want to speculate the LTCG within the prescribed long-term specified bonds/ property (LTCA) and adjust to the underlying circumstances.

The LTCG ought to be invested within the LTCA inside a interval of 6 months from the date of such switch. The funding in LTCA throughout the monetary 12 months wherein the unique asset is transferred and within the subsequent 12 months shouldn’t exceed ₹50 lakh.

Hence, in your case, towards the LTCG of ₹1 crore earned in FY 22-23, the general exemption underneath part 54EC of the Act, can not exceed ₹50 lakh.

Investment of LTCG in one other residential home in India shall be eligible for exemption underneath Section 54 of the Act. The LTCG would have to be invested to buy one other residential home inside 1 12 months earlier than or 2 years after the switch of authentic asset or to assemble a brand new home inside 3 years of switch of authentic asset.

Also, funding in specified bonds as much as a restrict of ₹50 lakh in FY 23-24 (nevertheless inside 6 months from the date of switch), shall be eligible for exemption.

Under Section 54 of the Act, in case the LTCG is lower than ₹2 crore, funding made by the use of buy or development, in two residential home properties, at your possibility, could also be eligible for exemption topic to fulfilment of the opposite prescribed circumstances. Such possibility can nevertheless be availed solely as soon as in your lifetime. Hence if already availed in any earlier FY, the exemption will likely be restricted to funding in just one residential home in India.

Scenario 2: It has been assumed that the properties offered by you’re land or constructing or each.

Against the LTCG of ₹40 lakh earned in March 2023 on first property, whilst you can make investments as much as ₹50 lakh in 2022-23, the exemption will likely be restricted to the quantity of LTCG i.e., ₹40 lakh.

Against the LTCG of ₹60 lakh earned in May 2023 on second property, you’re entitled to a most exemption of ₹50 lakh solely.

The LTCG can be required to be calculated individually for every FY.

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

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