Is Indexation allowed on selling Land when using Section 54EC to reduce tax?

Income Tax Income from Capital Gains
1

Hi,

I bought a land in July 2010 for 3,35,000 and have sold it in Aug 2022 for 5,70,000. The Circle Rate in 2022 is 12.05L, so considering 90% of Circle Rate, the price at which land was sold will be shown as 10.96L.

Would my Capital Gains in this case be 11L - 3.35L = 7.33L? or 11L - 6.63L = 4.33L (indexation applied)?

I also sold a Residential flat for 93.6L and paid Registry and Stamp of 8.12L. The plot of this flat was acquired in 1999 for 2.11L (indexed to 6.99L at 2022) construction was done in 2003-04 of 0.42L (Indexed to 1.27L) and 2L in 2004-05 (indexed to 5.85L).

Would the Capital Gains in this case be 93.6L- 8.12L- 6.99L- 0.42L- 5.85L = 71.34L.

Would my total CG would be either 78.67L or 75.67L?

I have bought REC bonds for 50L under section 54EC. To remove rest of my tax liability, I am planning to deposit the remaining amount in Capital Gains Account.

Should i deposit

  • 78.67 - 50 = 28.67L or
  • 75.67 - 50 = 25.67L or
  • 71.34 + 10.96 - 50= 32.31L (because indexation is not applied on land(because it is not residential flat) and entire sale proceeds have to be deposited in CG account to save tax)

P.S.: I am planning to offset Plot CG against 54EC (50L Bonds) and then use the remaining bond amount (50 - CG of Plot) to offset against residential flats. The remaining CG of residential flat after this will deposit in Capital Gains account. Please let me know if this is ok!

P.P.S: If i deposit 30L in the CG account just to be at the safe side, would it be a problem?

Thanks in advance!

2

@CA_Niyati_Mistry if you can help.

1 Like
3

Hello @C_Kumar,

You can claim the indexation benefit on sale of land as well as the residential property and the expenses incurred on construction.

You need to invest in REC bonds within 6 months of sale. The exemption is on investing in the bonds not when you deposit the money in Capital Gain Account Scheme. In your case you can get benefit of ₹50 lakhs invested in REC.

Hope this helps!

1 Like
4

Hi @CA_Niyati_Mistry,

Thanks for the reply!

Still couple of doubts, Can i not use Section 54 and 54EC together?
I already bought the bonds for 54EC. But because I have more CG than the limit of 54EC, I am planning to deposit money in Capital Gains Account
Also like I had mentioned, would a CG of 25.67L be correct?

Thanks!

5

Hello @C_Kumar,

Yes, you can claim both the sections together.

For further queries you can Ask an Expert.