To avail exemption from Long Term Capital Gains (LTCG) tax on the sale of a house property by investing in Capital Gains Bonds (under Section 54EC of the Income Tax Act), only the net capital gain (i.e., the amount of capital gain earned after deducting the indexed cost of acquisition and any other eligible expenses) needs to be invested, not the total sale consideration.
Can one buy 54 EC BOND To save LTCG on silver or gold sell
Yes, investing in 54EC bonds can help save on long-term capital gains (LTCG) tax, but it’s specifically available for gains from the sale of long-term capital assets like land or buildings. Unfortunately, the tax exemption under Section 54EC doesn’t apply to LTCG from the sale of gold, silver, or other movable assets.
For long-term capital gains (LTCG) from the sale of gold or silver, there are no direct reinvestment options specifically designed for tax exemption. However, a few alternative strategies might help reduce or defer tax liabilities:
- Section 54F – Investment in Residential Property:
If you have LTCG from selling gold or silver, you can reinvest the entire sale proceeds (not just the gains) in a residential property to claim an exemption under Section 54F. Keep in mind:
- The exemption is proportionate. If you reinvest only part of the sale proceeds, the exemption will apply proportionally.
- You must not own more than one other residential property on the date of transfer.
- You need to purchase the property within 1 year before or 2 years after, or construct within 3 years after the date of transfer.
- Offsetting Capital Losses: If you have capital losses (either short-term or long-term) from other investments like stocks, mutual funds, or property, you can offset these losses against your LTCG on gold or silver to reduce your taxable gains.
- Capital Gains Account Scheme (CGAS): If you plan to reinvest in a residential property but haven’t yet identified the property, you can deposit the gains in a CGAS account before the due date for filing your tax return. This deposit preserves your exemption eligibility, giving you time to complete the purchase/construction of the property.
- Diversified Investment Planning:
Tax-efficient investments such as equity-linked savings schemes (ELSS) or specific fixed deposits for tax saving (under Section 80C) can help reduce overall tax liabilities.
If i sell your property and the LTCG exceeds ₹50 lakh say 70 lakhs , can I invest 50 lakhs in 54 EC bonds in fy year of selling and remaining amount 20 lakhs in the next financial year, provided the investment is made within 6 months from the date of the sale. Does it allow to spread the investment across two financial years while still complying with the 6-month rule.
Hello @Immadi_Bhimeswara_ra
Yes, you can invest ₹50 lakh in 54EC bonds in the financial year of sale and the remaining ₹20 lakh in the next financial year, as long as the total investment is made within six months from the date of sale.
However, there is a maximum investment limit of ₹50 lakh under Section 54EC. This means that while you can split the investment across two financial years, the total exemption is capped at ₹50 lakh, and the remaining will be taxable.
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If the realisation from sale of property held long term is in the Q4 quarter of a FY, say Feb 2025 (FY 2024-25), do I have to invest in 54ec bonds in the same FY 2024-25 (ending in March 25) - or does the 6 month timeframe allows investment till May 25 which is in the next FY2025-26?
Hello @sindra
As per Section 54EC of the Income Tax Act, the investment in bonds must be made within six months from the date of sale.
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as per section 54, if i have sold a property which is single holding, do I need to buy a bond or property in single holding or joint holding?
Hello @Dwiti_Jariwala ,
If you sold the property as a sole owner, then the capital gains will be taxable only in your income tax return.
Thus, if you want to claim exemption on the same you can either deposit the amount equal to capital gains in the prescribed bonds or invest the equivalent amount in a new house property. The value of your ownership should be equal to the value of the gains to claim a full exemption.
Section 54EC allows tax exemption on long-term capital gains from the sale of land or a building if the gains are invested in specified bonds (like NHAI or REC) within 6 months. The maximum investment limit is ₹50 lakh, and the bonds must be held for 5 years to claim the exemption.