You may say, “Yes I know this!” But there are many having a different situation and confused with the wordings of the section 54EC. The existing provisions contained in sub-section (1) of section 54EC of the Act provide that where capital gain arises from the sell/transfer of a long-term capital asset and the assessee has, within a period of 6 months, invested the whole or part of capital gains in the long-term specified asset, the proportionate capital gains so invested in the long-term specified asset, out of the whole of the capital gain, shall not be charged to tax. The proviso to the said sub-section provides that the investment made in the long-term specified asset during any financial year shall not exceed Rs. 50 Lakhs rupees.
Many a time the wordings of the said clause has put the assessee into a confusing state to think again on the below points;
- Investment into specified bond/asset u/s 54EC should be done within 6 months from the date of sell/transfer of long term capital asset.
- The max limit of investment under 54EC should not exceed Rs. 50 Lakhs in particular financial year
Now this can be argued saying that, if an assessee incurs long term capital gain for an amount of Rs. 1 crore on 1st of January 2014 and he invests Rs. 50 Lakhs out of the gain amount before 31st March 2014, then still he has time till end of June 2014 to invest another Rs. 50 Lakhs because June will be a different financial year and the clause as stated above has indicated Rs. 50 Lakhs allowed in one financial year and investment should be done within 6 months from the date of sell/transfer. Both the conditions satisfied! So logically the assessee should take advantage of Rs. 1 crore investment into these bonds spreading Rs. 50 Lakhs each in two financial years i.e. FY 2013-14 and FY 2014-15 respectively.
The new proposal in budget 2014 proposed to insert a proviso in sub-section (1) so as to provide that the investment made by an assessee in the long-term specified asset, out of capital gains arising from transfer of one or more original asset, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed Rs. 50 Lakhs rupees.
Date of Applicability: This amendment will take effect from 1st April, 2015 and will, accordingly, apply in relation to assessment year 2015-16 and subsequent assessment years.
Text of amendment: In section 54EC, in sub-section (1), after the proviso, the following proviso shall be inserted with effect from the 1st day of April, 2015, namely:
“Provided further that the investment made by an assessee in the long-term specified asset, from capital gains arising from transfer of one or more original assets, during the financial year in which the original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees.”.