Exemption of Long term capital gains invested in Capital gains bonds

1. Tax Exemption:

.01      Long Term Capital Gains [ LTCG ] arising from sale of immovable asset are exempt if the same are Invested in Capital Gains Bonds within a period of six months of the transfer.

.02      LTCG upto INR 5 mn will be exempt from tax if the same are invested in Capital Gains Bonds.

.03      If part of LTCG are invested in Capital Gains Bonds exemption will be granted to that extent. 

.04     However if the LTCG total to more than INR 5 mn than the exemption is restricted to INR 5 mn   only and the balance of LTCG are not eligible of tax exemption under this scheme.       

2. Conditions:
 

.01      The Capital Gains Bonds should be held for a minimum period of five years.

.02      The exemption has a ceiling of INR 5 mn.
 

.03      The Investment is to be made within six months of transfer.
 

3. Contravention:
 

.01      If the Capital Gains Bonds are sold within the period of five years then the LTCG exempted earlier will be taxed in the year of such sale.

.02     Availing a loan or mortgage of said Bonds will also be treated as sale and LTCG exempt earlier will be taxed upon such event.
 

4. Capital Gains - Computation :
 

.01  While calculating the LTCG, indexed cost will replace the actual cost.

.02  Indexed cost is computed increasing the purchase price by notified cost of living index for each year of holding.
 

.03  LTCG are arrived at by deducting such indexed cost from the sale price.
 

.04  In case of immovable properties, sale price is to be replaced by the valuation of the property determined by the State Registrar for stamp duty payable by the buyer if the same is higher.