54EE – EXEMPTION OF LONG TERM CAPITAL GAINS ON INVESTMENT IN NOTIFIED UNITS OF SPECIFIED FUND (FUND TO BE ESTABLISHED FOR “START UP INDIA ACTION PLAN”
This exemption section is applicable from AY 2017-18.
This exemption is available to any person under the head CAPITAL GAINS.
The nature of capital asset that should be transferr (sell) to claim exemption is LONG TERM CAPITAL ASSET (original asset).
To claim exemption tax payer shall invest in units issued before 1ST DAY OF APRIL 2019 of such fund as Central Government may notify (fund to be establish for start up India action plan).The Time limit for acquiring units is 6 MONTHS FROM THE DATE OF TRANSFER. The Quantum of exemption will be lower of the amount investe in units of notify fund or capital gain earn.
The amount of investment in the specified units shall NOT EXCEED INR 50 LACS in a financial year and the benefit shall also be available in the subsequent financial year if the period of 6 months from the date of transfer spills over to the subsequent financial year.
Exemption can be withdrawn in subsequent years if such units of notified funds are transferred or sold or loan is taken on security of such units within 3 years from the date of purchase of units . I.e. LOCK IN PERIOD IS 3 YEARS.
When exemption is withdrawn, long term capital gain will be taxable at the rate prevailing when exemption is withdrawn.
Moreover there is no scheme of deposit available under this section.
Explaining 54EE through example-:
Mrs X, resident woman, transfers a house property resulting into long term capital gain amounting to Rs 1, 01, 50,000. Date of transfer- 16 January, 2017. She invests a sum of Rs 45, 00,000. In notified units of specified fun for the purpose of section 54EE. She further invests a sum of Rs 46, 00,000 in the same units on 5 May,2017. Accordingly, She wants to claim exemption of Rs 91,00,000 under 54EE.
Investment time limit is 6 months from date of transfer.
Date of transfer is 16 January, 2017
So last date of investment is 15 July, 2017
Since entire investment is make before 15 July. i.e. on 16 January and 5 May.
So 45 lacs +46 lacs = 91 lacs is eligible for exemption.
But as section specifies, investments in units for both the financial years put together shall not exceed Rs 50 lakhs. So Mrs X will be allow exemption of Rs 50,00,000 and not of Rs 91,00,000.
CAPITAL GAIN 1, 01, 50,000
Less: EXEMPTION 50,00,000
TAXABLE PORTION 51,50,000
In my opinion, in the new section introduce by government, there is double benefit for society as assesses can claim exemption by investing in specifi bonds and this specifi fund set up specifically for the startups in India.