Section 54EC Exemption of LTCA on Purchase of Specified Bonds

Example

In case,we sell any LTCA, earn LTCG and later purchase specified bonds,

Then LTCG on Sale of Asset will be exempt

Conditions to be Fulfilled

• Deduction is available to all assessees
• This deduction is on LTCG only (Not STCG)
• Sale of All Long Term Capital Asset covered. Even Depreciable assets held for 36 months or more covered
• Person should invest the amount of LTCG in purchasing Specified Bonds
• Specified Bonds are bonds of NHAI (National Highway Authority of India) or RECL (Rural Electrification Corporation Limited).These are repayable after 36 months

Time Period

• Purchase should be made within 6 months of date of transfer

Amount Exempt is Lower of

• Amount of Long Term Capital Gain
• Amount Invested

Note:-

Maximum Investment in Bonds in year asset transferred and year bonds purchased cant exceed 50 lacs

Question 1

Mr. Kumar, aged 50 years, is the owner of a residential house which was purchased in

September, 1993 for Rs.  5,00,000. He sold the said house on 5  August, 2015 for Rs.  24,00,000.

Valuation as per stamp valuation authority of the said residential house was Rs.  40,00,000. He

invested Rs.  5,00,000 in NHAI Bonds on 12 January, 2016. He purchased a residential house

on 5th July, 2016 for Rs.  10,00,000.

Cost inflation index for F.Y. 1993-94 and 2015-16 are 244 and 1081, respectively.