Question And Answer
Subject: LTCG
Querist: S K SINGAL
Answered by:
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Date: April 3, 2022
Query asked by S K SINGAL

Sold house involving LTCG – What are the must-to-d0 as the proceeds have been kept in parents’ Savings & FD Bank Accounts; What would be the index from 2009 (purchase-deed) to 2021 (sale deed) ? For purchase, part investment was from Sister, who has now been paid with compensation for those 12 years – Eligible Interest on such borrowed money was never claimed in any of the Assessment Years from FY 2009-10 till FY 2020-21;

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Answer given by

The Assessee received an amount from sale of residential house and he desires to claim exemption against said sale proceeds in his Return of Income,. For claiming exemption he has to invest i.e. capital gain amount in to 54 EC Capital Gains Tax Exemption bonds at any time within the period of six months after the date of such transfer of residential house or capital assets instead of depositing in Saving Accounts or FD Bank Accounts. ( He can invest maximum of 50 lakhs during any financial year )

Under Section 54 EC of Income Tax, 1961, an investor need not pay any tax on any long-term capital gains arising on sale of any asset, if the amounts of capital gains are invested in certain specified bonds.
The eligible bonds under Section 54EC are REC (Rural Electrification Corporation Ltd), PFC (Power Finance Corporation Ltd) and IRFC (Indian Railways Finance Corporation Limited) etc.
54EC bonds, or capital gains bonds, are the finest ways to save long-term capital gain tax arising from sale of a long-term capital asset, thus availing the necessary tax exemption.

 The Index for the sale of residential house on capital gain is as under :
Long-term capital gain = full value of consideration received or accruing in 2021– (indexed cost of acquisition + indexed cost of improvement if any + cost of transfer), where:
Indexed cost of acquisition in 2009 = cost of acquisition x cost inflation index of the year of transfer/cost inflation index of the year of acquisition.
Indexed cost of improvement = cost of improvement x cost inflation index of the year of transfer/cost inflation index of the year of improvement.

In case the Querist desire to have a specific explanation on the issue of capital gain on sale of residential house it may be desirable to consult the tax consultant who can guide after studying the facts .

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