The Capital Gains Blog

Archive for the ‘Capital Gains Exemption’ Category

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Question: what bonds should be bought to avoid capital gains on sale of a house?

I am thinking of selling my house. but worried about tax implications i.e., capital gains. can i buy any particular bond to get exemption from payment of capital gains

Answer: If you are talking about UK, then have a look at the following link

http://www.capitalgainstax.org.uk/

If you are talking about India then

If the whole amount or any amount more than capital gain is invested in the long-term specified asset, the entire capital gain is exempt from tax.

CAPITAL gain arising from the transfer of a long-term capital asset will be exempt from tax under section 54EC, if the amount of capital gain is invested in the long-term specified asset and upon the fulfilment of various conditions provided in the section. A detailed discussion of the section is given below:

Nature of asset transferred:

The asset transferred must be a long-term capital asset.

Long-term capital asset are those asset that are not short-term capital asset and Short-term capital asset are any share, listed debentures (etc) held for 12 months or less, or any other asset held for 36 months or less.

Amount to be invested:

To claim the exemption under this section, the whole or any part of Capital Gains has to be invested.

Investment to be made in:

The capital gains must be invested in the Long-term Specified Asset.

Long-term Specified Asset means any bond redeemable after three years, issued on or after 1-4-2000, by the National Bank for Agricultural and Rural Development (NABARD) or by the National Highways Authority of India, on or after 1-4-2001, by the Rural Electrification Corporation Ltd., on or after 1-4-2002, by the National Housing Bank or by the Small Industries Development Bank of India.

Time limit for investment:

Investment in the long-term specified asset should be made within a period of six-months after the date of transfer or sale of the original asset.

Amount of exemption:

If the whole amount or any amount more than capital gain is invested in the long-term specified asset, the entire capital gain is exempt from tax.

But if the cost of the long-term specified asset is less than the amount of capital gain, then capital gain proportionate to part of the amount invested will be exempt.

Other conditions:

After availing the exemption, the long-term specified asset has to be retained by the assessee for a minimum period of three years from the date of acquisition.

Where the cost of long-term specified asset is also eligible for rebate u/s. 88 of the Income Tax Act, the said rebate will not be allowed if the exemption is availed u/s.54EC.

Consequences on transfer of bonds within 3 years:

If, at any time, within a period of three years from the date of its acquisition, the long-term specified asset is transferred or converted (otherwise than by transfer) into money or if any loan or advance is taken on the security of such long-term specified asset, the amount of capital gain which was exempted at the time of transfer of the original asset will be deemed to be long-term capital gain in the year in which long-term specified asset is transferred or converted into money or in the year in which loan or advance is taken against security of such specified asset.

It may be noted that the entire exempted amount of capital gain will be brought to tax, irrespective of the quantum of loan or advance taken.

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Question: if the whole fund from sale is to be invested in bonds or the capital gain calculated is to invest in bonds?

if some funds from sales is 6 lakhs. and capital gain calculated after deducting exemption etc comes out to be 240000. then for bonds if the whole amt of 6 lakhs or the capital gaIN calculated 240000 is to be invested ? and if the interest paid is agian liablr for tax and how it is paid like quatery yeary or after maturity.
i mean to say the the whole sale amount plot or the capital gain calulated to be invested in bond. eg sale amount is 6 lakhs capital gain 240000.

Answer: Capital gains portion is enough.

But which fund ??. If you can tell details, then we can calculate correctly and advise you.

UMC Reports 2009 Fourth Quarter Results

Fourth Quarter 2009 Overview :