Section 54EC of Income Tax Act "Capital gain not to be charged on investment in certain bonds"
54EC. (1) Where the capital gain arises from the transfer
of a long-term capital asset, being land or building or
both, (the capital asset so transferred being hereafter in
this section referred to as the original asset) and the
assessee has, at any time within a period of six months
after the date of such transfer, invested the whole or any
part of capital gains in the long-term specified asset, the
capital gain shall be dealt with in accordance with the
following provisions of this section, that is to say,-
(a) if the cost of the long-term specified asset is not less
than the capital gain arising from the transfer of the
original asset, the whole of such capital gain shall not be
charged under section 45;
(b) if the cost of the long-term specified asset is less
than the capital gain arising from the transfer of the
original asset, so much of the capital gain as bears to the
whole of the capital gain the same proportion as the cost of
acquisition of the long-term specified asset bears to the
whole of the capital gain, shall not be charged under
section 45 :
Provided that the investment made on or after the 1st day of
April, 2007 in the long-term specified asset by an assessee
during any financial year does not exceed fifty lakh rupees
:
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.
(2) Where the long-term specified asset is transferred or
converted (otherwise than by transfer) into money at any
time within a period of three years from the date of its
acquisition, the amount of capital gains arising from the
transfer of the original asset not charged under section 45
on the basis of the cost of such long-term specified asset
as provided in clause (a) or, as the case may be, clause (b)
of sub-section (1) shall be deemed to be the income
chargeable under the head "Capital gains" relating to
long-term capital asset of the previous year in which the
long-term specified asset is transferred or converted
(otherwise than by transfer) into money:
Provided that in case of long-term specified asset
referred to in sub-clause (ii) of clause (ba) of the
Explanation occurring after sub-section (3), this
sub-section shall have effect as if for the words "three
years", the words "five years" had been substituted.
Explanation.-In a case where the original asset is
transferred and the assessee invests the whole or any part
of the capital gain received or accrued as a result of
transfer of the original asset in any long-term specified
asset and such assessee takes any loan or advance on the
security of such specified asset, he shall be deemed to have
converted (otherwise than by transfer) such specified asset
into money on the date on which such loan or advance is
taken.
(3) Where the cost of the long-term specified asset has been
taken into account for the purposes of clause (a) or clause
(b) of sub-section (1),-
(a) a deduction from the amount of income-tax with reference
to such cost shall not be allowed under section 88 for any
assessment year ending before the 1st day of April, 2006;
(b) a deduction from the income with reference to such cost
shall not be allowed under section 80C for any assessment
year beginning on or after the 1st day of April, 2006.
Explanation.-For the purposes of this section,-
(a) "cost", in relation to any long-term specified asset,
means the amount invested in such specified asset out of
capital gains received or accruing as a result of the
transfer of the original asset;
(b) "long-term specified asset" for making any investment
under this section during the period commencing from the 1st
day of April, 2006 and ending with the 31st day of March,
2007, means any bond, redeemable after three years and
issued on or after the 1st day of April, 2006, but on or
before the 31st day of March, 2007,-
(i) by the National Highways Authority of India constituted
under section 3 of the National Highways Authority of India
Act, 1988 (68 of 1988); or
(ii) by the Rural Electrification Corporation Limited, a
company formed and registered under the Companies Act, 1956
(1 of 1956),
and notified by the Central Government in the Official
Gazette for the purposes of this section with such
conditions (including the condition for providing a limit on
the amount of investment by an assessee in such bond) as it
thinks fit:
Provided that where any bond has been notified before the
1st day of April, 2007, subject to the conditions specified
in the notification, by the Central Government in the
Official Gazette under the provisions of clause (b) as they
stood immediately before their amendment by the Finance Act,
2007, such bond shall be deemed to be a bond notified under
this clause;
(ba) "long-term specified asset" for making any investment
under this section,-
(i) on or after the 1st day of April, 2007 but before the
1st day of April, 2018, means 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;
(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, 1956 (1 of 1956) or any
other bond notified in the Official Gazette by the Central
Government in this behalf.