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LTCG Bonds –S.54EC benefit to be restricted from assessment year 2019-20 and lock-in-period will increase from 01.04.2018

Budget - By: - CA DEV KUMAR KOTHARI - Dated:- 5-2-2018 - Links and references: Provision which will be amended is S.54EC of the Income-tax act, 1961. Popular LTCG bonds: Popularly known, in taxpayers circle , as long-term capital gain bonds (LTCG bonds) are notified for the purpose of section 54EC are presently issued by REC an NHAI. At present the lock-in-period is three years. Re-investment with benefit of deduction is permitted in relation to any LTCG. Budget proposal As per Budget proposals, .....

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in-period so that the investor is not able to withdraw funds before specified period. d. To provide an incentive to taxpayer to conserve capital by allowing saving of tax (at cost of low earning in future on such bonds). In facts tax saved causes net yield by way of interest to improve. e. To curb a check on black money by attracting money in LTCG bonds. No change in circumstances: In the economic circumstances, there appears no basic change so as to make very significant changes in scheme of ta .....

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ial to society at large. There appears no change in that situation. REC and NHAI both need more funds. Therefore, restricting reinvestment for land and /or building appears not a measure of rationalisation. So far increase of lock in period to be increased from three years to five years is concerned, it can be said to be rational and in tune with long-term objectives of such bonds and fund raising. However, from the point of view of investor this measure will be irrational This is because there .....

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espective of assets on sale of which assessee has earned LTCG. For example, at present certain bonds issued by REC and NHAI are notified. So far REC and NHAI are concerned, it make no difference to them and the purpose for which such funds are raised whether the bond subscriber has earned LTCG on sale of land and / or building or any other capital assets. Apparent mistake in proposal: For the transfer of LTCG within 31032018, assessee can make reinvestment in such bonds within six month from the .....

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uld be allowed for reinvestment of any LTCG during FY 2017-18 (AY 2018-19) and suitable changes should be made in the proposal. Besides GOI must also ensure that such LTCG bonds are available till 30.09.2018. Request and suggestions: Allow issue to three years bond and make available till 30.09.2018. The deduction should be allowed to continue in respect of all long-term capital gains and should not be restricted to land or building or both only. The lock-in-period should be kept in two or three .....

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ediately and make reinvestment before 31.03.2018 so that he can make reinvestment in LTCG bonds redeemable after three years. Timely action is required because such bonds will be in high demand just before 31st March, 2018. As per proposal w.e.f. 01.04.2018 only five years bonds will be available. Therefore, if reinvestment is not made before 31.03.2018 reinvestment will have to be made in five years LTCG bonds. From: THE FINANCE BILL, 2018 20. Amendment of section 54EC. In section 54EC of the I .....

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e after three years and issued on or after the 1st day of April, 2007 but before the 1st day of April, 2018; (ii) on or after the 1st day of April, 2018, means any bond, redeemable after five years and issued on or after the 1st day of April, 2018, by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 (68 of 1988) or by the Rural Electrification Corporation Limited, a company formed and registered under the Companies Act, 19 .....

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charged to tax subject to certain conditions specified in the said section. It is proposed to amend the said section so as to provide that capital gain arising from the transfer of a long-term capital asset, being land or building or both, invested in the long-term specified asset at any time within a period of six months after the date of such transfer, the capital gain shall not be charged to tax subject to certain conditions specified in the said section. Clause (ba) of the Explanation to the .....

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sset for making any investment under the said section on or after the 1st day of April, 2007 but before the 1st day of April, 2018 shall mean any bond, redeemable after three years and issued on or after the 1st day of April, 2007 but before the 1st day of April, 2018 and for making any investment under the section on or after the 1st day of April, 2018 shall mean any bond, redeemable after five years and issued on or after the 1st day of April, 2018 by the National Highways Authority of India o .....

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