Table of Contents
1. What is section 54EC of Income-tax Act?
Section 54EC of Income-tax Act provides exemption in respect of long term capital gain which arises during sale/transfer of Land or building or both.
2. Can I claim exemption under section 54EC in respect of short term capital gain?
No, exemption under section 54EC can be claimed only in respect of long term capital gain.
3. In what type of asset should I invest in order to claim exemption under section 54EC?
Long term specified asset. (refer FAQ no 9 to know about long term specified asset)
4. When should I purchase long term specified asset to claim exemption under section 54EC?
The assessee should purchase long term specified asset within 6 months from the date of transfer of land/ building
5. Who can claim exemption under section 54EC?
Exemption under section 54EC is available to all assesses.
6. What is the maximum amount of exemption under section 54EC?
The amount of exemption will be the lower of the following
- Amount invested in specified assets.
- Capital gain from transfer of land or building.
- 50 lakhs.
7. When will exemption under section 54EC be withdrawn?
If the assessee should transfers or converts or avails loan or advance on the security of such bonds within a period of 5 years from the date of acquisition of such bonds.
8. What happens if the entire amount of capital gain is not invested in purchase of a long term specified asset?
The amount of capital gain not invested is charged to tax as long-term capital gains under section 45.
9. What do you mean by long term specified assets?
The following are long term specified assets for the purpose of claiming exemption under this section?
- Rural Electrification Corporation Limited or REC bonds.
- National Highway Authority of India or NHAI bonds.
- Any other bond notified by Central Government in the Official Gazette.
- Bonds issued by PFC (Power Finance Corporation Ltd).
- Tax savings bonds issued by IRFC (Indian Railways Finance Corporation Limited).