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Income tax filing: Capital gains taxable in year of asset transfer
October, 10th 2016

As per Section 45(1) of the Income Tax Act, gain arising from the sale of a capital asset is taxable in the year in which transfer takes place.

I sold a plot of urban land during 2015-16, but did not receive the entire sale consideration as per deferred payment schedule. Do I need to offer entire sale consideration for capital gains tax in FY 2015-16 or in the year of receipt?

As per Section 45(1) of the Income Tax Act, gain arising from the sale of a capital asset is taxable in the year in which transfer takes place. Further, this section has to be read with Section 48 which starts with ascertainment of the full value of consideration received or accruing as a result of the transfer. The word ‘accruing’ in Section 48 makes it clear that entire sale consideration as a result of transfer of the capital asset is taxable in the year in which transfer takes place, irrespective of year of receipt. Therefore, you have to offer entire sale consideration for capital gains tax in FY 2015-16 even though you have not received the full amount in the said year.

I earned long-term capital gains on sale of house and claimed exemption under Section 54EC by investing in REC bonds after seven months when the bonds were available in market. Will I be eligible to claim capital gain tax exemption?

In order to claim exemption under Section 54EC, the long-term capital gains on transfer of asset are required to be invested in the specified bonds within a period of six months after date of such transfer. However, in the instant case, it was practically not possible for you to make the required investment within the specified time limit due to the unavailability of the specified bonds. Considering this, you may be allowed to claim the benefit of Section 54EC based on judicial pronouncements.

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