Exemption u/s 54EC - Capital Gains - Investment in specified bonds

• Section 54EC of the Income Tax Act 1961 contains exemption on transfer of immovable property.

• This exemption is available to all assessees.

• The asset to be transferred should be an immovable property being land or building or both.

• The capital gain on transfer of immovable property should be only long term in nature to avail this exemption.

• In order to avail this exemption, the assessee has to invest in the bonds of NHAI/RECL/PFCL/IRFCL which are redeemable after a period of 5 years.

• Such investment has to be done within a period of 6 months from the date of transfer of immovable property.

• Amount of exemption: The amount of exemption shall be lower of capital gain amount and investment in bonds. However, the maximum exemption that can be claimed under this section is Rs. 50 lakhs.

• The provisions relating to CGAS Scheme are not applicable for investments made under this section.

• Lock in period: The new bonds purchased should not be transferred or converted into money within 5 years from the date of their acquisition. If they are transferred or converted into money within the said time period, then the exemption claimed earlier shall be withdrawn and amount of exemption claimed shall be taxable as Long Term Capital Gain in the year in which such bonds are transferred or converted.

• The bonds are said to be converted into money if any loan or advance is taken by the assessee on the security of such bonds.