Simplified Explanation of Section 54EA of The Income-tax Act, 1961:

If you make money (capital gain) from selling an asset you've held for a long time before April 1, 2000, and within six months you use all or part of that money to buy certain investments like bonds, debentures, shares, or mutual fund units (which the government has listed in a notice), then you might not have to pay tax on that gain:

(a) If the money you spend on these new investments is equal to or more than the money you got from the sale, you won't have to pay any tax on the gain.

(b) If you spend less on the new investments th...

Section 54EB of the Income Tax Act, 1961, offers taxpayers an exemption from capital gains tax on the transfer of long-term capital assets, provided the gains are reinvested in specified assets within six months of the transfer. This exemption is applicable to individuals, Hindu Undivided Families (HUFs), companies, Limited Liability Partnerships (LLPs), firms, and other entities.

Key Features of Section 54EB:

Eligible Assets:

The capital gains must be invested in assets specified by the Central Board of Direct Taxes (CBDT). These typically include bonds issued by entities like the National Highways Authority of India (NHAI) and the Rural Electrification Corporation (REC).

Investment Timeline:

The reinvestment must be made within six months from the date of transfer of the original asset.

Lock-in Period:

The invested amount must remain in the specified asset for a minimum of seven years. If the asset is transferred or converted into money within this period, the capital gains exemption is revoked, and the gains become taxable.

Exemption Proportion:

If the cost of the specified asset is less than the capital gains, the exemption is proportional. For example, investing a specified asset costing 80% of the capital gains exempts 80% of the gains from tax.

Non-Eligibility for Section 88 Rebate:

Amounts invested under Section 54EB are not eligible for deductions under Section 88 of the Income Tax Act