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Tejas Chokshi  | Answer  |Ask -

Tax Expert - Answered on Apr 25, 2023

CA Tejas Chokshi has over 20 years of experience in financial planning, income tax planning, strategic and risk advisory, banking and financial products and accounting and auditing.
He is an information system auditor, a forensic auditor and concurrent bank auditor.
Chokshi, who has a master’s degree in management, audit and accounting from Gujarat University, has completed his CA from the Institute of Chartered Accountants of India.... more
Asked by Anonymous - Feb 21, 2023Hindi
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I have sold a flat in January,2023 and there is capital gain of 70 lakhs. The yearwise Limit to invest in bonds under 54 EC is Rs.50.00 lakh/annum. Whether I can invest capital gain of 70 lakhs in two financial years i.e. 50 lakh in FY 2022-2023 and 20 Lakhs in FY 2023-2024 ? please guide.

Ans: No, you cannot split the capital gain amount and invest it in two different financial years for claiming deduction under section 54EC. The limit of Rs. 50 lakh is an annual limit, which means you can invest up to Rs. 50 lakh in one financial year to claim the deduction.

Therefore, in your case, you can invest a maximum of Rs. 50 lakh in eligible bonds under section 54EC during the financial year 2022-2023 to claim the deduction. You cannot carry forward the unutilized limit of Rs. 20 lakh to the next financial year.

It is important to note that the bonds under section 54EC have a lock-in period of 5 years. You cannot sell or transfer these bonds for a period of 5 years from the date of purchase.
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |8442 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Feb 13, 2025

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Hi When the capital gains is rs85 lakhs, can I invest 50 lakhs in bonds and remaining 35 lalks in residential property? Regards
Ans: You have capital gains of Rs 85 lakh. You want to invest Rs 50 lakh in bonds and Rs 35 lakh in a residential property. Your approach is partially correct, but let’s analyse it in detail.

Exemption on Capital Gains Bonds (Section 54EC)
You can invest up to Rs 50 lakh in specified capital gains bonds.

These bonds have a lock-in period of 5 years.

Interest earned from these bonds is taxable.

You must invest in these bonds within 6 months of sale to claim exemption.

Exemption on Residential Property Purchase (Section 54F)
You can reinvest capital gains in a new residential property.

The property must be purchased within 2 years or constructed within 3 years.

If you buy a new property, you must not own more than one house before this purchase.

Can You Use Both Options Together?
Yes, you can combine both options to save tax.

Investing Rs 50 lakh in bonds will give partial exemption.

Investing Rs 35 lakh in property will also give partial exemption.

Any amount not reinvested will be taxed as per capital gains rules.

Alternative Tax-Efficient Options
If saving tax is your main goal, you can invest fully in bonds.

If wealth creation is the goal, consider investing in mutual funds after tax payment.

Actively managed mutual funds can give better long-term returns.

Important Considerations
Liquidity: Capital gains bonds have a 5-year lock-in.

Returns: These bonds offer lower returns than equity mutual funds.

Long-Term Strategy: Investing in mutual funds can help you grow wealth over time.

Finally
Your plan is correct, but you must consider tax rules carefully.

If you need liquidity, avoid investing too much in bonds.

A Certified Financial Planner can help you optimise your investment plan.

Always align investments with your long-term financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

..Read more

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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