Skip to main content

Real Estate - Tax Saving investment can be done within calendar month

Download Tax Saving Mutual Fund Application Forms

Invest In Tax Saving Mutual Funds Online

Buy Gold Mutual Funds

Leave a missed Call on

94 8300 8300

 

 

Tax payers need not invest proceeds from sale of property strictly within 180 days from date of sale to get exemption under Section 54EC

 As there was no dispute that the taxpayer had invested the money in capital gains bonds, the Bench overlooked the fact that the investment was done with a delay of a few days

 

Taxpayers looking to save taxes on long- term capital gains, but not willing to invest in a house property, are eligible to invest the capital gains in specified bonds of public sector undertakings like National Highway Authority of India ( NHAI) and Rural Electrification Corporation (REC) and save capital gains taxes under section 54EC of the Income Tax ( I- T) Act. These bonds offer a lock- in period of three years beyond which they can be liquidated. The interest rate offered by the bonds is approximately 6 per cent and the interest earned on the bonds is taxable.

These bonds are a good option available for taxpayers to save capital gains taxes without committing money over the long term. The section, however, restricts the amount of exemption to ₹ 50 lakh invested in these bonds per financial year.

 

Section 54EC of the I- T Act provides that where the long term capital gain is invested by a taxpayer, at any time within a period of six months after the date of transfer of the capital asset, in the specified bonds, then the resulting capital gains will be exempt to the extent of amount invested in the bonds. Recently, in a case that came up before the Special Bench of Income Tax Appellate Tribunal, Ahmedabad, a taxpayer had sold his flat for a total consideration of ₹ 64 lakh. In his return of income, the taxpayer had computed the capital gains as nil. The basis for the nil capital gains was that the gain was stated to be approximately ₹ 56 lakh; however, he had made the investment in NHAI bonds to the tune of ₹ 45 lakh and claimed a deduction under section 54EC of the Act. The balance gains of ₹ 12 lakh were invested in a capital gain account scheme.

 

During the course of assessment proceedings, the tax officer observed that the investment in NHAI bonds of ₹ 45 lakh for the purpose of claim of deduction u/ s 54EC was purchased on December 17, 2008 as per the entry in the bank pass book. The tax officer further observed that the sale document was registered on June 10, 2008 and hence the taxpayer was required to purchase the bonds within six months of the date of registration.

 

The taxpayer informed the tax officer that the last date of expiry of six months from the date of transfer of the house property was December 10, 2008; however, he had tendered the cheque along with the application for the bonds on December 8, 2008 to the bank, which was within the period of six months from the date of sale. The taxpayer put up another stand that the time limit for investment in bonds is available till the end of month of December 2008. But tax officer denied the exemption to the taxpayer in the assessment order.

 

The taxpayer then preferred an appeal with first appellate authority, where he submitted that as the application was submitted to the bank along with the cheque before the last day of the expiry of six months from the date of sale, he was entitled to the deduction u/ s 54EC. However, as the date and time stamp on the application copy was not clear, the appellate authority could not ascertain its validity. Hence, the authority too rejected the taxpayer's claim. When the matter came up before the Special Bench, the taxpayer argued that the term ' month' as used in the section 54EC has not been defined in the Act. Consequently, the same should be interpreted as per the definition given under the General Clauses Act where the term ' month' is reckoned as per the British calendar.

 

The tax officers argued that in respect of the computation of period for the purpose of prescribing alimitation under the Act, the wordings are unambiguous.

 

As per the language, a particular date is to be taken into account for the purpose of calculation of days/ months. In view of the same, there was no necessity to take the help of "General Clauses Act". Therefore, the tax officers claimed that for the purpose of section 54EC, a month is a period from specified date in a month to the date numerically corresponding to the date in the following months less one.

 

The Special Bench observed that the crux of the issue at hand is whether for the purposes of section 54EC, the period of investment should be calculated as six months after the date of transfer or to be reckoned as 180 days from the date of transfer. The Bench observed that the phrase " within a period of six months after the date of transfer" has not been used in the Act for any other provisions and is used only for the purpose of investment in certain specified assets in respect of computation of capital gains. It observed that the Act has provided an incentive to a taxpayer, who has earned long- term capital gains, to get relief if the gains are invested in any specified assets, provided the investment has been made at any time within a period of six months after the date of such transfer.

 

The Bench relied on other judgements on the interpretation of the term month and it was observed that in majority of the cases, the expression six months means six calendar months and not 180 days. In the absence of the definition of the word ' month' in the Act, the one given in the General Clauses Act shall prevail. As there was no dispute that the taxpayer had invested the money in capital gains bonds, the claim that the investment was done with a delay of few days does not support the purpose of the incentive offered by the section. Accordingly, the Special Bench allowed the taxpayer's claim.

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

Leave a missed Call on 94 8300 8300

Leave your comment with mail ID and we will answer them

OR

You can write back to us at

PrajnaCapital [at] Gmail [dot] Com

---------------------------------------------

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

---------------------------------------------

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Franklin India Bluechip
      4. ICICI Prudential Top 100 Fund

B. Large and Midcap Funds Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
      4. Birla Sun Life Front Line Equity Fund
      5. Franklin India Prima

C. Mid and SmallCap Funds Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
      5. Birla Sun Life Dividend Yield Plus
      6. SBI Emerging Businesses Fund
      7. HDFC Mid-Cap Opportunities Fund
      8. ICICI Prudential Discovery Fund

D. Small and MicroCap Funds Invest Online

      1. DSP BlackRock MicroCap Fund

2.Franklin India Smaller Companies

E. Sector Funds Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
      3. ICICI Prudential Banking and Financial Services Fund

F. Tax Saver Mutual Funds Invest Online

1. ICICI Prudential Tax Plan

2. HDFC Taxsaver

      1. DSP BlackRock Tax Saver Fund
      2. Reliance Tax Saver (ELSS) Fund

G. Gold Mutual Funds Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund
      4. Birla Sun Life Gold

H. International funds Invest Online

1. Birla Sun Life International Equity Plan A

2. DSP BlackRock US Flexible Equity

3. FT India Feeder Franklin US Opportunities

4. ICICI Prudential US Bluechip Equity

5. Motilal Oswal MOSt Shares NASDAQ-100 ETF

Popular posts from this blog

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...
Read more

Mutual Fund Review: HDFC Index Sensex Plus

  In terms of size, HDFC Index Sensex Plus may be one of the smallest offerings from the HDFC stable. But that has not dampened its show, which has beaten the Sensex by a mile in overall returns   HDFC Index Sensex Plus is a passively managed diversified equity scheme with Sensex as its benchmark index. The fund also invests a small proportion of its equity portfolio in non-Sensex scrips. The scheme cannot boast of an impressive size and is one of the smallest in the HDFC basket with assets under management (AUM) of less than 60 crore. PERFORMANCE: Being passively managed and portfolio aligned to that of the benchmark, the performance of the index fund is expected to follow that of the benchmark and in this respect, it has not disappointed investors. Since its launch in July 2002, the fund has outperformed Sensex in overall returns by good margins.    While every 1,000 invested in HDFC Index Sensex Plus in July 2002 is worth 6,130 now, a similar amount invested in Sensex then wo...
Read more

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...
Read more

National Savings Certificate

National Savings Certificate Here's everything you need to know about the 5-year savings scheme offered by the Government This is a 5-year small savings scheme of the government. From 1 July 2016, a National Savings Certificate (NSC) can be held in the electronic mode too. Physical pre-printed NSC certificates have been discontinued and replaced with Public Provident Fund-like passbooks. What's on offer The minimum amount you can invest in them is Rs100 and there is no upper limit. Under this scheme, all deposits up to Rs1.5 lakh qualify for deduction under section 80C of the Income-tax Act, 1961. The interest earned is taxable. You can invest in multiples of Rs 100. These certificates can be owned individually, jointly and also on behalf of minors. The interest rates for all small savings schemes are released on a quarterly basis. The effective rate for NSC from 1 October to 31 December is 8%. The interest is calculated on an annual compounding basis and is given along w...
Read more

Different types of Mutual Funds

You may not be comfortable investing in the stock market. It might not seem like your cup of tea. But you can start by investing in Mutual Funds. Many first-time investors invest in Mutual Funds. This is because they do not know how to invest in individual securities. Basic information on Mutual Funds People invest their money in stocks, bonds, and other securities through Mutual Funds. Each Fund has different schemes with specific objectives. Professional Fund Managers look after these schemes. Your Fund Manager could help you invest in a scheme that suits your financial goal. Functioning of Mutual Funds You could make money through Mutual Funds in different ways. A single Mutual Fund could hold many different stocks, bonds, and debentures. This minimizes the risk by spreading out your investment. You could earn dividends from stocks and interest from bonds. You could also earn capital by selling securities when their price increases. Usually, you could choose to sell your share any t...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now