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Section 54EC | Capital Gain Tax Exemption

Any long-term capital gain, arising to any assessee from the transfer of any Capital Assetswhether it is a buildings or land or both on or after April 1, 2000 shall be exempt to the extent such capital gain is invested within 6 months from the date of transfer of such above said capital assets,in long term specified assets such as bonds. However, these bonds cannot be sold within 5 years from the date of its acquisition. The investment in long-term specified assets cannot exceed INR 50 Lacs during any relevant financial year.

Therefore, Capital gain arising on transfer of any capital asset will be exempt u/s 54EC under the following situations:

  • The Asset transferred is long-term capital asset whether it is land or a building or both.
  • The gain will be long term capital gain.
  • The asset must be transferred on or after April 01, 2000.
  • The assessee has invested the long-term capital gains in the specified assets within a period of 6 months from the date of such transfer of capital asset.
  • The assessee cannot claim the cost of investment as deduction under section 80C.
If all the aforesaid mentioned conditions are satisfied then exemptions can be claimed under section 54EC.

Amount of Deduction

If the amount of capital gain is equal or less than the cost of the long term specified asset acquired, then the entire capital gain shall be exempted. Where the amount of Capital Gain is greater than the cost of specified asset then the cost of long term specified asset shall be allowed as exemption and the balance capital gain shall be taxable.

To avail the benefit the deduction u/s 54EC the assessee needs to invest in specified asset within 6 months from the date of transfer of such asset.

Where the long term specified asset is transferred within 3 years from the date of its acquisition, then the amount of capital gain exempt u/s 54EC earlier, shall be taxable as Long-Term capital Gain during the previous year in which the above said asset is sold.

Taxcellent also provide tax advisory on issues related to Capital Gain. We also assist you about the Income Tax Return Filing in Delhi India and saving maximum tax amount accordance with the provisions of Income Tax Act, 1961. 


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