To avail of section 54EC exemption, one must invest long-term capital gains (not
the sale proceeds), either wholly or in part in a specified instrument, within six
months of the transfer of the asset.
The exemption is available to the extent of the gains invested or the cost of acquisition
of the asset, whichever is less.
The following conditions should be satisfied:
Long term capital asset: A long term capital asset is transferred by an assessee
(who may be an individual, firm, company or any other person) during the previous
Investment in “specified asset” – within six months from the date of transfer of
the asset, the assessee should invest the whole (or any part of ) capital gain in
the long term specified assets. “Long term specified assets” means any bond redeemable
after 3 years issued—
• By the National bank for agriculture and rural development or by the national
highways authority of India;
• By the rural electrification corporation Ltd; or
• By the National Housing bank or by the small industries development bank of India.
Amount of exemption:
The amount of exemption under section 54EC is as follows:
The amount of Capital gains generated on transfer of capital asset; or,
The amount invested in specified assets as stated above, whichever is lower.
(ii) Any individual investor investing upto rupees five lakh shall be treated as
retail investor and any individual investor investing more than rupee five lakh
shall be treated as High Networth Individual.]