I had actually offered a property flat on 6th July 2019 which was purchased in 2000. I want to invest the capital gains in capital gain Bonds to obtain tax exemption u/s 54EC. According to the Income Tax laws I was needed to make such financial investment within 6 months from date of sale, which has actually currently ended. As I comprehend the federal government vide notice no. 35 outdated 29 June 2020 has actually extended the date for making financial investments to obtain capital gains exemption till September 30 this year. If I invest in capital gains bonds prior to 30 Sep 2020 as per the notice released, I desired to understand whether I can likewise declare the exemption. If not then do I have any other alternative readily available to conserve the taxes on capital gains? Kindly inform me the very best alternative.
– Ajay Pillay
By Balwant Jain, Chief Editor, Apna Paisa
As you appropriately stated, for declaring exemption under Section 54EC, in regard of long term capital gains occurring on sale of a land or structure, you are needed to invest the indexed capital gains in bonds of some defined organizations within 6 months from the date of the sale.
You are best about the extension given by the federal government for making financial investments in order to claim exemption of particular long term capital gains. The prolonged duration for declaring exemption is just appropriate for the cases where the last date for making the financial investments was falling in between 20th March 2020 and 29th June 2020.
Your case is not covered under notice no. 35 outdated 29th June 2020 as the duration of 6 months had actually currently ended on 5th December 2019 so you can not obtain the advantage of prolonged duration for purchasing the bonds and you might need to pay tax on such long term capital gains.
All is not lost. You still have an alternative readily available under Section 54, where you can declare exemption from long term capital gains if you purchase a property home within 2 years or build a home within 3 year from the date of sale of your flat. You can still declare the exemption if you have actually currently purchased a property home within one year prior to date of sale of the flat.
The law even more supplies that in case you are unable to use the taxable capital gains for the above mentioned functions prior to the ‘due date’ of filing of the tax return, you need to transfer the taxable capital gains in a ‘Capital Gains Account’ to be opened with some authorised banks. The cash transferred in capital gains account can be used for purchasing or building a property home within the specific duration.
Generally the ‘due date’ for filing ITR is July 31 for the majority of the taxpayers however provided the pandemic, the due date for filing of ITR for Previous Year 2019-20 (Assessment year 2020-2021) has actually been extended till November 30. You can transfer the taxable capital gains in the capital gains account prior to 30th November in case you are unable to use the capital gains by purchasing a home in such a brief time.
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