If you are using your entire sale proceeds to buy a house property, you may pay no tax on your gains when – You satisfy all these conditions.
What happens if you do not intend to purchase another property, there is no use in investing the amount in a Capital Gains Account Scheme. In such a case, you can still save the tax on your capital gains by supporting them in certain bonds. Bonds issued by the National Highway Authority of India (NHAI) or Rural Electrification Corporation (REC) have been specified for this purpose. These are redeemable after three years and must not be sold before the lapse of 3 years from the date of sale of the house property.
You are allowed a period of 6 months to invest in these bonds – through to claim this exemption. You will have to invest before the return filing date. The Budget for 2014 has specified that you can support a maximum of Rs 50lakhs in a financial year in these bonds.
A proposed amendment under Section 54EC
Budget 2018 has proposed an amendment to Section 54EC of the Income-tax Act. This section currently provides for an exemption of long term capital gains(“LTCG”) on sale of any Long Term Capital Asset provided the capital gains are invested within six months from the date of transfer, in the particular long term specified assets viz any bond, redeemable after three years and issued on or after the 1st day of April 2007 by the National Highways Authority of India constituted under section 3 of the National Highways Authority of India Act, 1988 or by the Rural Electrification Corporation Limited.
Vide the Budget, the government has proposed to amend the above section by restricting its scope only to capital gains arising from long-term capital assets, land, building, or both. It is also proposed to provide that specified long-term asset, for making any investment under the section on or after the 1 April 2018, shall mean any bond, redeemable after five years as against the earlier three years and issued on or after 1 April 2018 by the National Highways Authority of India or by the Rural Electrification Corporation Limited or any other bond notified by the Central Government in this behalf.
For short-term capital gain, the person can benefit from the basic exemption limit of the income tax slabs.
Hence, the following persons can benefit from the basic exemption limit.
Hence, the only benefit of exemption in short-term capital gain is an unutilised basic exemption limit, as explained above.