One of my Assessee having 3 lands ownerships in percentages amongst brothers in Baroda Area. Where the Assessee decided to retain only 1 land and sale the 2 land ownership percentages/rights to other brothers and on sale my assessee receives the amount of sale consideration and against which 1 he retains he pay off to his brothers share as purchase consideration.
i.e. Land 1 (which my assessee retains) pay off his brothers Rs. 54.00 Lacs (purchase consideration)
Land 2 (which my assessee receives on his brothers on sale Rs. 30.00 Lacs (sales consideration)
Land 3 (which my assessee receives on his brothers on sale Rs. 40.00 Lacs (sales consideration)
Now query is that on calculation of indexation if capital gain arrives some amount, can I claim the CG against my new purchase, under section 54EC upto Rs. 50.00 Lacs as per REINVESTED in Land.
The whole transaction is done in Baroda Area within the Municipal Corporation Limit.
Please give URGENT Feed Back because 15th March, 2009 is nearest for Advance Tax if you resolve the query fast so I can make the payment in time
Waiting your reply.
NILESH H GAJJAR
In your query two main information are missing
- whether Land in the question is Agriculture land ?
- Asset sold (land) is short term or Long term capital asset.
without above two input ,one can not give suitable reply so I am taking some assumptions and answering your queries in different conditions.
A) Land is Not covered under agriculture land and a short term asset.
Short term capital can not be saved.
B) Land is not agriculture Land But a long term asset.
in this case tax can be saved under
- Section 54 EC(investment in bonds)
- Section 54 F(investment in New residential house)
To claim Section 54 EC following conditions is to be satisfied.
- Long Term Capital Asset Long term assets means any capital asset held by assessee for more than 3 Years.
- If assesee has sold the Long term capital asset during the previous year and made a long term capital gain then he can invest money of capital gain in Capital gain bonds and can save tax on long term capital gain.
- Assessee here means all type of assessees,like individual,firm company etc.
- Amount to be invested in bonds is only capital gain not net consideration received on sale of long term capital asset
- Amount exempted under this section will be amount of capital gain or amount invested in capital gain bond which ever is lower maximum up to 50Lakh(see note below)
- These Bonds Maturity Period is Three years
- Capital gain bonds eligible under this section are now can be issued only by REC or NABARD
- Bonds can not be pledged ,sold transfer before completion of three year from purchase of bonds ,and in case its transferred then amount capital gain exempted on investment in these bonds will be made taxable in that previous year as Long term capital gain .
- Amount of capital gain should be invested in Capital gain bond within 6 Month from date of transfer/sale of capital asset .
Further, If the person gets the Capital assets by will ,or inheritance,gift etc then period of previous owner is also considered to count Long term capital assets .(three years )but indexation is to be done from the date when assessee gets the ownership.
From the above conditions if the land is a long term capital assets then your client is eligible to claim the deduction under section 54 EC if he purchase capital gain Bond by NABARD or REC.
To claim Section 54F following conditions is to be satisfied.
- person has sold long term capital asset other than residential House
- person has purchased with in one year before from date of transfer or with two year after the transfer of long term assets or construct a house with in three years from date of transfer of long term asset in present case Land.
Reinvestment of capital gain in Land is not covered under section 54EC or 54F and there is no benefit for Purchase of land as such.but if your client is interested in claiming section 54F then amount used to purchased the land will also be considered to claim deduction under 54 F provided new residential house is to be completed with in prescribed time given in the sectionon the same land, that is 3 year from the date of transfer of original long term assets i.e Land in present case.(subject to some other conditions)
C) LAND IS AGRICULTURE LAND.
If the land in the question is a agriculture land used for the same purpose for last two years then your client can claim deduction under section 54B for purchasing shares in the agriculture land.As the purchase of share is Land is also treated equal to purchase of new land.this is subject to some conditions.
One suggestion I would like to mention here that you should go for a family settlement deed if these assets are divided among brothers if they got the rights due to Inheritance.
related readings
So if I understand correctly based on what you mentioned above, if I sold a plot of land (non agricultural land and no house on property) for LTCG of Rs. 1 Crore on 1ST MARCH 2013, then because the 6 months period starts on 1st MARCH 2013, and next financial year begins on 1st APRIL 2013, I can invest in 50L bonds in March 2013 and again 50L in bonds in April2013 and claim total 1 crore LTCG benefit by investing in bonds?
ReplyDeleteAlso, how can I show this on my returns filed for FY 2012-2013 as don't I have to make the investments before IT return date? Or is it that I can show full 1 Crore benfit in the IT reutrn for FY 2012-2013 as the return filing date is June/July 2013 and I would have invested full 1 CRore before than in the bonds?
Please do respond! Thanks,
Hemanshu