Query 1]

I have recently sold my inherited property at Rs. 60 Lacs. I want to park the money in the REC/NHAI. I am told that maximum of Rs. 50 Lacs can be deposited there. My queries are:

  1. What should I do with the balance Rs. 10 Lacs? If I keep in bank fixed deposit, then am I required to pay tax at the highest slab i.e., @ 30% for this 10 Lacs of Rupees?
  2. I am told that the amount parked in REC/NHAI can be kept for 3 years. After three years when this money is transferred to bank, do I need to pay tax on these Rs. 50 Lacs then? [S.K. Roy, Santi Nagar, Bhilai –]


  1. U/s 54EC of the Income Tax Act-1961, there is a maximum investment ceiling of Rs. 50 Lacs in a financial year for deposit in the specifie bonds issued REC/NHAI. For exemption, amount is require to be invest within a period of 6 months from the date of transfer. The amount of Long Term Capital Gain (LTCG) is taxable at a special rate of 20% (and not as per the rate of regular tax slab like @ 30% in your case). It may be note that sale consideration is not relevant for claiming an exemption u/s 54EC. If assessee can invest the entire amount of LTCG, he will be eligible for exemption for the entire amount. In your case, Rs. 60 Lacs is the sale consideration (& not LTCG) that you have received on sale of inherited property. You need to compute the LTCG on the transaction & if it is less than Rs. 50 Lacs, you can invest the amount of LTCG to have a full LTCG exemption.
    In a situation where the capital gain is more than Rs. 50 Lacs, the assessee could further explore the possibility of claiming simultaneous exemption under other section like exemption u/s 54 or 54F or 54B etc in addition to an exemption u/s 54EC
  2. It’s true that there is a lock in period of 3 years u/s 54EC. After completion of the holding period of 3 years, the principal amount received back is NOT TAXABLE.

Query 2]

  1. I was an employee of Infosys as Sr. Software engineer & I quit my job in July-2011 after 4 years of service, for higher studies. I got salary from April-2011 to June 2011 (around Rs. 75,000/-) & PF and other returnable around Rs. 1.75 Lacs, which is below tax limit, I guess. Is it necessary to file the IT returns (Form 16 or Saral) for the year 2011-12?
  1. My father retired from defense services in Aug-2010, i.e., during the financial year 2010-11. He filed IT returns & paid IT on his salary & other income like interest on SB account. In the year 2011-12, he received arrears on difference in gratuity pay on gratuity & commuted pension amount, which crosses the taxable limit. Please let me know what retirement benefits (like gratuity and commuted pension & their arrears or DA arrears etc) are taxable? Is it necessary for him to pay tax on complete amount of annual pension, DA arrears, Gratuity arrears & commuted pension arrears? []


  1. Filing of the income tax return for an Individual/ HUF is not mandatory if the gross total income is below the basic exemption limit. If your Gross Total Income during the financial year 2011-12 is below Rs. 1.80 Lacs, then you won’t be require to file the return of income. The different component included in Rs. 1.75 Lacs is not mentioned in the query & first you have to assess the taxable components included in Rs. 1.75 Lacs. As far as the taxability of CPF Accumulation is concern it may be note that, in case of withdrawal from the recognize provident fund, the amount is exempt only if it is withdrawn from the PF account maintain for more than 5 years continuously. If it is not so, the amount withdrawn is to be include in the income of that year, and is tax as per the prevailing income tax slabs / brackets.
  1. The tax treatment of various components of salary normally received by an employee at the time of retirements are as under:
    A] Provident Fund:
    Lump sum payment received from Statutory Provident Fund received by the Government employee is fully exempt from income tax u/s 10(12).
    B] Gratuity:
    In the case of Government employee, Gratuity amount is exempt from income tax u/s 10(10)(i) of the Income Tax Act- 1961.
    C] Commutation of Pension:
    Commuted pension received by a employee who has joined the Central Government before 01.01.2004 is fully exempt from tax u/s 10(10A)(i).
    D] Leave Salary:
    In the case of Government employee, any amount received as cash equivalent of leave salary in respect of period of earned leave at his credit at the time of retirement/ superannuation is exempt from tax u/s 10(10AA)(i)
    It is taxable. Even the arrears received is also taxable. However, in respect of arrears, assessee can claim a relief u/s 89(1).

Query 3]

I had purchased a shop for Rs. 9.88 Lacs for which I had paid registry charges of Rs. 41K. This whole sum of money was arrange after my father had taken a home loan of Rs. 8 Lacs & Rs. 2.50 Lacs Personal loan. I also borrowed a loan of Rs. 5 Lacs from other bank to maintain stocks in my shop & clear personal loans of my father. I had mortgaged my shop to take this loan of Rs. 5 Lacs. Now, I  want to sell the said shop for Rs. 13 Lacs so that I can clear all  loans . Kindly let me know what will be the tax liabilities? []


  1. The repayment of Rs. 5 Lacs to the bank with whom you have mortgaged the property for availing the loan is not deductible while computing the amount of income [i.e., Long term capital gain (LTCG)]
  1. The year of purchase/ sale, other income, etc is not mentioned in the query in the absence of which exact LTCG & tax liability could not be worked out. Your cost of acquisition is Rs. 10.29 Lacs whereas the sale price is Rs.13 Lacs. [If the Stamp Duty valuation of the property is more than Rs. 13 Lacs, LTCG would be required to be calculated by considering such higher amount.] If the shop is sale after a holding period of more than 3 Years, then the indexation benefit could also be avail by you.


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