This carry forward and set-off can be done within eight assessment years immediately succeeding the assessment year in which the loss was computed

This makes it clear that it is possible to set off the brought forward long-term capital loss against the long-term capital gains of the current year so long as the said the capital loss does not relate to a period earlier than eight assessment years immediately preceding the assessment year in which the set off is sought to be done.

Section 112 of the Income-Tax Act provides for LTCG tax. The section prohibits the claim of deductions under Chapter VI-A against LTCG and also the rebate under Section 88 on LTCG. Since Section 112 only prohibits the rebate under Section 88 from being claimed against the tax on LTCG, it should automatically follow that the rebate under Section 88B can be claimed against the tax on LTCG.

A person is a senior citizen eligible for rebate under Section 88B if he is an individual resident in India and 65 years or more at any time during the previous year. The rebate under this section for the assessment year 2004-05 (previous year 2003-04) would be the lower of the tax on total income or Rs 20,000.

Query

I had invested in bonds of Nabard and used exemption under Section 54EC in respect of capital gains. The said bonds had a lock-in of five years. I am now informed that the bonds carry an option whereby I can withdraw the entire amount invested along with the accretion after f 36 months from the date of investment. If I withdraw the same on the completion of 36 months, will there be a capital gains tax?

S. Viswanathan

Reply

There will be no liability to capital gains tax if you exercise the option of withdrawing the amount invested in Nabard bonds after the completion of 36 months from the date of investment. The exemption under Section 54EC is available subject to satisfying the following conditions:

The asset transferred is a long-term capital asset;

The investment is in bonds of Nabard, National Highway Authority of India, Rural Electrification Corporation, National Housing Bank or SIDBI; and

The bonds are redeemable after three years.

Section 54EC provides that if the bonds are transferred or converted into money within a period of three years from the date of its acquisition, the capital gains that was earlier exempt would be chargeable in the year in which the bonds are transferred or converted into money.

In the instant case, since you are exercising the option of redeeming it only after three years there will be no capital gains tax implications. The interest on the bonds would, however, be taxable as income depending on the method of accounting you are following.

Query

I was born in September 1939. When will I become a senior citizen?

M. Sebastian

Reply

You will be a senior citizen eligible for rebate under Section 88B in the assessment year 2005-06 (previous year 2004-05). The rebate under this section is available if you are a resident in India and of the age of 65 years or more at any time during the previous year.

You would attain the age of 65 in September 2004 and, hence, will be a senior citizen and eligible for rebate from the previous year 2004-05.

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