Exemption under section 54EC can be claimed twice

Exemption on capital gains. Section 54EC of the Income Tax Act provides an option to save taxes on Capital Gains  arising from transfer of long term capital assets subject to fulfilment of certain conditions.   The exemption is available if the assessee invests the amount of capital gain in long term specified bonds as notified by the government for a minimum period of 3 years. There are some more conditions imposed on the availing the deduction: 1) The investment needs to be made within the laps of 6 months from the date of transfer of the long term capital asset. 2) Another, limit imposed on the amount of investment is that only 50lakhs can be invested in the specified scheme in one assessment year. Let me clarify again that the above two conditions are exclusive of each other. The second condition does not mean that the total deduction would be limited to 50 lakhs. It specifies that the investment of Rs. 50 lakhs can be mad only once in a financial year. Hence, if you invest 50 lakhs individually in 2 different financial year , then the total amount of deduction can be extended up to Rs. 1 crore. However while doing this one should keep in mind that the financial year must change within 6 months from the date of transfer of capital asset.

Let us understand his with a case study:

Mr. A sold a capital asset on the 1 July 2013 making a capital gain of Rs. 150 lakhs. Availing the deduction under section 54EC Mr. A invests Rs. 50 lakhs in long term specified bonds. Now, Mr. A pays tax on long term capital gain @ 20% on 100 lakhs. The tax liability amounting to 20 lakhs. On the other hand, if the asset is sold on any date after 1st September 2013 then the investment under section 54EC may be claimed twice. Once in the FY – 2013-14 and again in the financial year 2014-15. Now the tax liability would be reduces to half of what was payable before to Rs. 10 lakhs. _____________________________________________________________________________________________ Feel free to write to us,at [info@taxmantra.com] or call us at +91 88208208 11.