TREATMENT OF ADVANCE TOWARDS LTCG EXEMPTION

Sir, My property is worth over 3.5Cr and I wish to sell it with minimum LTCG. Suppose I take an advance of 50L during Feb 2012 and the balance 3Cr after 90days,they will be treated as two separate Fin Years.Now my question is can I buy RBI bonds from the advance 50L and an additional 50L from balance and show exemption for each Fin Year? Also when I sell after 1.4.2012 does the DTC allow me to take FMV as on 1.4.2000 for calculation of LTCG?How will the advance be treated since it was taken before 1.4.2012? Please advice. KindRegards. Mani.

asked Sep 15 '11 at 21:00 by mulll 1111


The financial year in which the transfer of property happens, long term gains will arise in that year only.

As per section 54EC, Max investment in capital gain bonds is 50 lacs per financial year and it has to be done within six month of sale. If you sell (and transfer) property in Feb 2012, you can invest 50 lacs before march and 50 lacs after march (before July 2013). This way you can save income tax by investing 1 crore in capital gain bonds.

If property is sold after March, 2012, when direct tax code is applicable, long term gains will be computed with 2000 as base year (fair market value in April, 2000 will be taken as cost of property).

I think, Advance taken for property in previous financial year would be taxable when transfer of property happens. When sale executes only then it will incur long term capital gains.

answered Sep 23 '11 at 23:28 by pankaj 5.2k320

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Asked: Sep 15 '11 at 21:00

Seen: 1,270 times

Last updated: Sep 23 '11 at 23:28