QUESTIONS & ANSWERS
Concessions available for capital gains
I have sold shares and deposited the proceeds in specified bonds under Sec. 54EC to the extent of permissible limit. I have also acquired a house property satisfying the conditions under Sec. 54F. Some doubt has been expressed in some quarters that I cannot avail myself of both Sec. 54EC and 54F. Am I entitled to the deduction of investment made in the bonds and the house property?
The reader is entitled to benefits of both Sec. 54EC for specified bonds and 54F for residential house property, if he satisfies the conditions therefor. It appears that he has only purchased a site, in which case, the benefit of Sec. 54F will get confirmed only, if he completes the construction within three years of transfer and deposits the unspent amount on construction under Capital Gains Accounts Scheme with a bank recognised for this purpose before the due date for filing return for the year of capital gains. Presumably, the reader has not more than one house at the time of transfer, which is a condition for availing Sec. 54F.
There is no bar for a taxpayer availing himself of the benefit of more than one reinvestment as long as the aggregate relief does not exceed the capital gains itself, so as to entitle the assessee to a loss under the head capital gains. Relief will be limited to capital gains. Investment in specified bonds under Sec. 54EC is deductible from capital gains, but in the case of relief under Sec. 54F, deduction will be capital gains in the proportion of the cost of the property acquired to the net consideration received. If, however, the assessee had sold a residential house property and reinvested it in another residential house property, the reinvestment amount in the other house property will be deductible fully from the taxable capital gains under Sec. 54 of the Act. A number of queries have been received by sellers of properties for large consideration, quite often too late for availing any investment benefit.
The law on capital gains is complex with Sec. 50C deeming guidelines value as sale price subject to remedies available in the statute. In the computation of capital gains, choice of substitution of value on April 1, 1981, for properties acquired before the date and benefit of indexation besides reinvestment benefits and the need for payment of advance tax are matters, which are required to be known.
It is advisable that sellers consult and get professional advice. Advice from newspapers or even tax literature can only be of general nature.
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