If a Business Transfer / Slump Sale does not include immovable properties, but only good will and other movable assets, does Slump Sale proceeds (50B) be invested in 50EC or 54E or 54F. I want to know, if there are ways in which the Slump Sale proceeds can be invested to save the LTCG tax ?
Hi @DravidM
In case of a slump sale, exemption from LTCG tax can be availed subject to sections 54F and 54EC of the Income Tax Act.
Upto what limit can this benefit be availed.
Hi @DravidM
As per the recent budget announcement, the LTCG exemption will be capped at ₹10 crores.
This limit is applicable from FY 2023-24 onwards.
Thanks for your guidance. I have two more queries:
(1) If the payment for Slump Sale is done as deferred over a period of 3 years, the LTCG tax on the entire consideration amount has to be paid or it can be paid in a similar deferred period, as and when the payments are received?
(2) Under section 54F, if an investment is made for a part of the proceeds, how would be the benefit calculated?
Hi @DravidM
-
If the payment for Slump Sale is done as deferred over a period of 3 years, the LTCG tax on the entire consideration amount has to be paid on the date of the transfer only, irrespective of when the payment is received.
-
You will get the benefit of the investment u/s 54F in the year of the purchase agreement.
I have found that in an amendment, Budget 2018 the government has proposed to amend the section 54EC by restricting its scope only to capital gains arising from long-term capital assets, being land or building or both.
Does that mean that the Capital Gain out of Slump Sale will not be eligible for 54EC benefits ?