The booming real estate market meant that Kapil Kumar would manage to sell his house in Pune for a neat profit. He had bought the place 10 years ago with the idea that one day he would retire and also move out of Mumbai. However, 10 years on, the price that he was getting for his house was something that he hadn’t even dreamt of. Wanting to make hay while the sun shines, the deal had been completed in a record time. The only hitch that remained was the capital gains tax. Neat profit meant neater tax and he was thinking of ways of saving it.
He had heard that investing the profit back in real estate does save tax. However, he didn’t want to buy in the current market. A visit to his Chartered Accountant (CA) was warranted. Maybe, he could find a way out.He did!
Kapil learnt from his CA that the Income Tax Act exempts the capital gains from the sale of a house if the taxpayer invests within two years from the date of sale or constructs another house within three years from the
date of sale. If the entire capital gain is not used, proportionate deduction is available.
Now Kapil has two years to buy the new house. However, what if by 31st July, which is the last date for filing the tax return, he hasn’t found the right property? How does he convey to the Income Tax office that he does indeed intend to buy a house within the time allotted to him and hence, will not be paying tax on the capital gains earned during the year?
His CA advised him to keep the money in a special fixed deposit known as the Capital Gains Account Scheme (GGAS) in such cases.
Let’s assume Kapil earned longterm capital gains of `50 lakh. The tax at 20 per cent on this amount works out at `10 lakh (the 3 per cent education cess is ignored for ease of understanding). Seciton 54 offers him exemption from this tax if he purchases a house (costing R50 lakh) within two years or constructs one within three years.
Prior to 1988, Kapil would have been required to pay the tax in the financial year during which the capital gains arose, even if he intended to buy or construct a house. After purchasing or constructing a house within the stipulated time frame, he could pray for the refund. When he actually receives the refund depended upon
the strength of his prayers. Moreover, it was inconvenient for the Income Tax Office (ITO) to dig up the past records to check the veracity of the claim.
Enter CGAS
Fortunately, the Tax Department was seized of this impractical approach. CGAS, introduced in 1988, eliminated the need to reopen the assessments for rectifications. Therefore, in effect, CGAS is a special account with banks or specified institutions to be used when the amount of capital gain is not utilised for the purchase or construction of the new asset before the due date of furnishing return of income. (Notification No. 724(E) dated 22 June 1988)
If the amount deposited is not utilised fully for purchase or construction of new asset within the stipulated period, then the amount not utilised will be treated as capital gain of the year, in which the period of three years from the date of sale of the original house expires.
The salient features
- There are two types of accounts;Type-A (savings deposit) andType-B (term deposit). Type-B can be either cumulative or noncumulative.Interest rates will be the same as those applicable to the normal savings and term bank deposits.
- The effective date for claiming exemption will be the date on which the bank receives the application,subject to the realisation of cheque or draft. However, the interest will be payable from the date on which cash is paid or the cheque or draft is realised.
- Amounts are freely transferable from Type-A to Type-B and vice versa. For premature transfers from Type-B to Type-A, the normal penalties will be applicable.
- Withdrawals can be made only from Type-A by submitting a declaration that the amount sought to be withdrawn is proposed to be utilised for the intended purpose. Where the amount sought to be withdrawn exceeds R25,000, the bank shall make payment by way of a crossed demand draft drawn in favour of the person to whom the depositor intends to make the payment. The amount withdrawn shall be utilised within 60 days. The unutilised portion, if any, shall be redeposited into CGAS.
A lacunae
That being said, there does exist some lacunae in this otherwise useful product. Let us see what these are:
- CGAS does not allow any withdrawals, except for the specified purpose (of buying the house), even of interest. Moreover, the investor is required to pay tax on this interest (to which he has no access) on accrual basis out of his other income.
- Even if the sale is affected, in say the first month of the fiscal year (say April ’11), the taxpayer may deposit the amount in CGAS on the last date for filing returns. In other words, he can freely utilise this money for 15 months (April ’11 to July ’12) as he likes.
- We have already discussed the fact that if the amount is not utilised wholly or partly for the desired purpose, within the specified period, the unutilised amount shall be treated as capital gains of the year during which the specified period expires.
If this amount is to be treated as capital gain of that year, can the assessee purchase another house within two years or construct within three years? Can he use CGAS once again?
It is illogical to do so and also the fact remains that this capital gain has not arisen out of sale of house, shares,
etc. Therefore, the answers to these questions are in the negative. However, experts believe that the taxpayer has got a right to set off carried forward capital losses against these gains.
capitol loss put the negative impact on the value of taxes scores and also performance of worker working under the taxes institute
ReplyDeleteafter the expiry of said 3/2 years in CGAS instead of paying LTCG can he purchase 54ec bonds for next 3 years and can he withdraw the amount after the said period of bond without LTCG taxation.
ReplyDeleteNo, Capital gain bonds can only be purchased with in 6 months from date of transfer of asset
DeleteI NEED GUIDANCE AS TO WHETHER I HAVE TO SHOW IN IT RETURN SALE PROCEED OF HOUSE THOUGH I HAVE INVESTED IN ANOTHER HOUSE WITH ADDITIONAL AMOUNT WITHIN 3 MONTHS OF RECEIVING SALE PROCEEDS IN THE SAME FINANCIAL YEAR
ReplyDeleteYES ,You have show sale and investment data in required columns in Income tax return ,use ITR-2 if there is no business income in your hand
DeleteIf i purchase a new property on capital gain within 2 years than do i need to show my capital gain in the present financial year .
ReplyDeletePlease ask query with all facts in detail
Deletethe LTCG on sale of residential land can be used to transfer of ancestor property
ReplyDeleteIf you have actually paid any money for ancestral property(house) then you can claim deduction u/s 54F.But if no money has been paid then no deduction
DeleteDear sir,
ReplyDeleteI have sold my House and willing to invest the same 40 lacs in purchasing of another in different location after 3 months. Can I use the amount to invest in shares for three months and if I make a quick buck of 4 lacs, then what will be the tax implication>?
profit from Investment in shares for short term is taxable @ 15 % .But as per income tax act you have to deposit the money in capital gain account scheme before return filing date applicable for financial year in which you have transfer the old house.
DeleteYou refer to "deposit the Money" in CGAS and I would like to know whether its the capital gains only that needs to be deposited or the entire amount on the sale of house.
DeleteEx: if I sell my house for 55 lacs in 2012 and as per cost inflation index calculation the value of the house is 40 Lacs as on date. Then the 15 lacs (55-40 lacs) is the capital gains. So, In order to save tax on this 15 lacs I need to deposit this 15 lacs only in CGAS and the rest 40 lacs can be used for my own purpose for a period of 6 months and will use the same amount (40 lacs + 15 lacs in CGAS) to buy a new house.
Please correct me if iam wrong in this case.
Under section 54 you have to deposit only capital gain amount .In given example only 15 Lakh,.
DeleteFurther investment in new House also required to be 15 lakh to claim full exemption.
Note : My personal suggestion to you is that do not look at share market as quick money source ,otherwise you loose at your money. Make investment ,do not trade or speculate . I am telling you my personal experience after wasting my 10 years in share Market.
if sm 1 buyed a house cn he also open a account and he wud save tax if he want to buy a new house
ReplyDelete4 EXAMPLE,pLS ASK IN DETAILS
DeleteDear Raja Babu,
ReplyDeleteI sold my house in Aug,2009 for 90 lacs. I had bought it in 2001 for 20 lacs. This means that my capital gain amount was 70 lacs, which i deposited in CGAS on 28th Sept 2009. I had planned to buy a plot from this money and get a house constructed in 3 years.In Feb 2012 I had bought a plot for 50 lacs and wanted to construct my house but due to some dispute on the title of the plot unfortunately, i have so far not been able to start construction on it. In case i am unable to start with any construction till this Sept End 2012 i will ultimately have to pay 20% capital gain tax. My ques. to u is that will this 20% tax be calculated on the entire 70lacs that was the original capital gain amount or will i have to pay 20% capital gain tax on the non-invested 20 lacs.[(70lacs original capital gain - 50 lacs invested in purchase of plot)].??? And how will i be able to withdraw the non invested 20lacs from CGAS. I will be deeply indebted if you can answer my concern.
As per rule if house is not completed then you have to pay tax on full amount. (70 lakh). The second option is to sell this plot and invest money at other place and built house by September,2012
DeleteIf I already have purchased second house before selling the first one. Now I want to sell the first one... First house is more than 5 yr old purhcase. now Can I take Tax benefit for the second house. Second house is not 2 yrs and 1 month old...also suggest if there are any other ways I can save tax
ReplyDeleteNo ,you can not take benefit from 2nd house. Only house purchased within one year is eligible.other ways are bonds section 54EC
Deletehttp://www.simpletaxindia.net/2008/10/capital-gain-bond-us-54ec-vs-capital.html
a senior person sold his house in august, however the following year he passes away in march , before opening Capital Gains Account, i.e. the sale proceeds of house were still in his savings a/c. Now his heirs are filing retn, on his behalf, can they deposit money in capital gains account, or what is other alternative, what is the tax treatment then
ReplyDeleteIn my view they can deposit money in CGAS
DeleteBeing the Landlord & a Cess Building I intend to sell the Development Right to a Reputated Builder for Reconstruction of Old Building under Sec 33 (7) DCR Rules. Would like to Know the Tax Implications on amount Recd towards share of Development Rights, this amount will be paid by a Developer in Different Stages till completion of Project.
ReplyDeleteKindly advice pertaining to tax Implications. Assuming amount recd for Developement Right at 10Cr.
you should consult CA with complete details as the amount involved is huge . Structure your deals in such a way so that minimum tax implications .
Deleteyou may read this link also
http://www.simpletaxindia.net/2011/07/tips-for-tax-planningcapital-gain.html
Further to my question dated 12 August 2012, Landlord of a Cessed Buidling, I would like to also state Property is purchased prior to 1980, & also I understand that for Indexation I have to take 1981 Base price which has to be worked for Indexation purpose.
ReplyDeleteI want to know : 1) When Development Right is transferred for Construction of a new tower, and as an Existing Occupant as A Landlord in which I will be getting the same Area Along with Extra Area as per DCR Rules than in that case what would be the TAX Implication, and how to proceed perstaining to sellin of Developement Right.
Sorry ,we are not master in these subject
DeleteTo avail the benefit of LTCG(Long Term Capital Gain) one should not sell a house before 36 months. My question is how the 36 months are calculated. Is it based from registration date of the property or posession date of the property. For example Registration date is Jan 2010 and Posession date is Dec. 2010. Then from when the LTCG will start Jan 2013 or Dec. 2013?Thanks in advance.
ReplyDeleteThere is nothing clarified in Tax act ,so if property is constructed then registration date can be considered .As in all the section word constructed or acquisition has been used in income tax act no where possession word is used. But it is disputed issue.
DeleteDear Sir,
ReplyDeleteWith respect to "Construct a new house property in the specified period", my query is:
Does the above phrase include Cost of Purchasing the Land on which the new house property is sought to be constructed?
In other words, does the cost of constructing the new house property shall comprise of the cost of purchasing the land or will it only comprise of the cost of construction, in its literal sense?
Cost of land is part of Cost of construction ,this is as per circular 667 dt 18-10-1993 reproduced here under.
DeleteWhether, in cases where the residential house is constructed within the specified period, the cost of such residential house can be taken to include the cost of the plot also
1. Sections 54 and 54F provide for a deduction in cases where an assessee has, within a period of one year before or two years after the date on which the transfer of a capital asset takes place, purchased, or has within a period of three years after that date constructed, a residential house. The quantum of deduction is itself dependent upon the cost of such new asset. It has been represented to the Board that the cost of construction of the residential house should be taken to include the cost of the plot as, in a situation of purchase of any house property, the consideration paid generally includes the consideration for the plot also.
2. The Board has examined the issue whether, in cases where the residential house is constructed within the specified period, the cost of such residential house can be taken to include the cost of the plot also. The Board are of the view that the cost of the land is an integral part of the cost of the residential house, whether purchased or built. Accordingly, if the amount of capital gain for the purposes of section 54, and the net consideration for the purposes of section 54F, is appropriated towards purchase of a plot and also towards construction of a residential house thereon, the aggregate cost should be considered for determining the quantum of deduction under section 54/54F, provided that the acquisition of plot and also the construction thereon, are completed within the period specified in these sections.
Circular : No. 667, dated 18-10-1993.
Dear Sir,
ReplyDeleteI have deposited amount Rs. 15,00,000 under CGAS (Account type B) in Oct 2011.
now I dont want to invest that amount in house property.
I want to use money for meeting my personal Liabilities.
Bank had given me "Form G" to Close above account.
Now my question is that
Should I have to pay Capital Gain Tax.
if yes then what is interest amount if my capital gain was 15,00,000 without indexation.
Please reply since my Income tax return is due on 31st August.
Thanks in advance for your time.
Dear sir,
Deletemy question is that should I have to pay capital gain tax before closing account or before filing income tax return.
You should file return before 31.08.2012. and in return you should claim exemption as intended for deposit of amount in CAGS.
DeleteAfter 31.08.2012 close the account and use the amount as desired.
By doing this amount of capital gain will be taxable in FY 2012-13 instead of FY 2011-12.
Capital gain of last year (FY 2011-12) will be added in your income of FY 2012-13 and no interest will be liable to be paid .
if you withdraw before return filing / 31.08.2012 then interest on pending tax will be payable @ 8.7 %. so pure saving of 8.7 % on tax due on capital gain amount(around 26000/-)
Dear Sir,
ReplyDeleteI have sold my residential empty plot for 45 lacs in may 2012, which I had bought for 1lac in the year 1995. I have not invested those money anywhere. I m buying a new flat for Rs. 50 lacs in the next month.
How do I proceed, I mean I can directly buy a flat with this money or I will have to park the capital gain amount in CAGS first and then withdraw the same for buyin a flat?
If I wont put the Capital gain in CAGS will have to pay the capital gain tax??
You can buy new home directly no need to deposit in CAGS.
DeletePls note that on sale date of plot you must not have more than one house u/s 54F
http://www.simpletaxindia.net/2008/10/capital-gain-bond-us-54ec-vs-capital.html
Dear sir
ReplyDeleteIn Nov. 2011, I sold a flat for which agreement of sale was made in Feb. 2007 & in this process, I got LTCG. I'm making arragements to deposit the LTCG in CGAS. Can I use this money to buy a plot, on which I may or may not build a house in the near future? The cost of the plot would be more than the LTCG.
Please note that when I purchased and also when I sold this flat, all along I owned another flat.
Your guidance is highly appreciated
You have sold a flat so section 54 is applicable so holding of another flat(one or more ) have no affect on Capital gain calculation.
DeleteFurther you can buy plot to save capital gain but you have to build/construct a house with in 3 years from transfer of old flat
Dear Sir,
ReplyDeleteMy mother has recently sold her property in Bangalore for 72 lacs. The LTCG on this is Rs. 60 lakhs. She plans to give me Rs.48 lacs. If I put this money in NHAI for 3 yrs,
A) would i have to invest the money after 3 yrs in a house
B) will have to pay tax on the interest I might get from investing in this fund
As the capital gain on your mother's name .So NHAI bonds must be purchased on her name only to save capital gain.
Deletea)As above, no use of investing the money on your name in NHAI bonds .It must be on your mother;s name.Further after three year no need to purchase house.
B)Interest earned from NHAI bonds is taxable in Investor's hand.
After i deposit capital gain from sale of land in CGAS, can i use this fund to pay installments of a flat (which is being built by a pvt. builder). The flat will be handed over to me in 3 years time. regards
ReplyDeleteyes ,You can use this money .In fact this money is kept in CAGS for using it in purchasing/construction of the house.
DeleteKeep in mind that 3 years starts from date of transfer of the old asset
Dear Sir,
ReplyDeleteMy father had purchased a flat. He expired without a will. My mother, myself and my brother sold the flat as legal heirs. Sale amount was equally distributed amongst three of us. Do we have to pay long-term capital gain tax on the entire sale amount (as we had not paid any money for purchasing the flat) or only on gains ?
Thanks
You have to pay tax only on gains, not on entire sale consideration.
DeleteSir my mother bought a flat for 10,00,000 in 2010 december by getting amount from our relatives. We had a plot which we have sold in feb 2012 for 16,00,000 and repaid 10,00,000 to our relatives. so what will be the capital gain for us. Will my mother have exemption for 10,00,000
ReplyDeleteNo , your mother is not eligible for capital gain relief for house purchased in 2010.
DeleteFurther to calculate capital gain on sale of plot (2012) .Pls provided date of purchase and cost of plot
dear sir,
ReplyDeleteI have invested in Capital Gain Fixed Deposit (B) 2 years ago and it is now maturing in 2 days. Now what are the posiibilities with me to avoid paying the tax.? Can I re invest in NHAI schemes or other bonds?
you have to invest in house build or construction . I think built house time also already have expired ,so it better to construct new house with in time specified.
DeleteFurther capital gain can not be saved by investing in capital gain bonds at this stage.
Can the capital gain be used for closure of home loan so that tax can be avoided?
ReplyDeleteiii
ReplyDeleteDear Sir,
ReplyDeleteMy father had purchased a flat costing about 4 Lacs. At that time the builder had formed a co-operative society and given only share certificate for our flat. On this certificate, it is mentioned that we are members of the society and we have paid membership fees of a few hundred rupees.
Now my father has expired and we have sold the flat. We do not have any documentary proof that my father had paid about Rs. 4 Lacs for purchasing the flat. We only have the share certificates on which the price if flat is not mentioned.
Is it necessary to provide a documentary proof of the purchase price of the flat to Income Tax authorities ? If yes, what should we do to get this proof ?
Thanks
TCB
Please contact to your builder OR Society.
DeleteHello,
ReplyDeleteIts mandatory to deposit the amount in CGA? or we can deposit in any other account and re-invest with 1-2 years?
Please help me to get this answered.
pls ask query in detail
DeleteMy father's property was disposed in Oct'11 and i and my brother have received equal share of 65lac each, which i have deposited in mynormal SB account and also I'm looking for an re-investment of same amount.
DeleteThe only thing i want to know will it be a problem for me since i have not deposited in Capital gain account?
Please suggest me what i need to do now.
Rgds,
if you want to claim capital gain tax exemption , then you must have deposit the capital gain amount in CAGS before return filing due date.
DeleteAs you have not done so , and due date already gone (31.08.2012) , now you can not claim capital gain exemption and have to deposit tax on capital gain amount from property sold.
what will be the percentage of tax i need to pay.
DeleteDo let me know if any other option you can suggest.
Sir,
ReplyDeleteI sold my flat in Sep 2010 and had opened CGAS in SBI in March 2011. The cap gains was Rs 900,000 after indexation. The plan was to buy another property, but that didn't materialize. I plan to pay the tax of Rs 180,000 (20%) in Oct 2012. Please let me know if I need to pay any interest on this tax.
There is no interest in such case .Further you can keep this money in CAGS till August 13 and can pay tax in august 13 ,if you wish to do so.
DeleteThanks a lot for the clarification, Sir.
DeleteDear Sir,
ReplyDeletePurchased flat in Feb 2005 for 15.25 Lacs
- Registration done for 8.3 Lacs
- Sale agreement for 15.25 Lacs , out of that 13 Lacs loan from IDBI
- All cheque transaction
Sold flat in Sep 27 2012 for 33.5 Lacs
- Registration done for 21 Lacs
- Sale agreement for 33.5 Lacs
- All cheque transaction
Could you please guide me how much would be my capital gain.
Thanks - Sasv
capital gain will be as under
Deletesale price=33.50
less :indexed cost of flat
15.25 X 852(CII for fy 12-13) / 480(CII for Fy 2004-05)
=27.07
Capital gain =33.50-27.07=6.43Lakh
Thanks Lot !
DeleteSold property in 2004 June for 12 lakh which was bought in 2001. Bought the plot for 10 lac in 2004 dec. Remaining amount used to purchase wood and material. Could not construct the house due to dispute on plot. Is there any need to pay longterm capital gain tax?
ReplyDeletetechnically payable but it will be huge amount after interest and penalties , so better to ignore this.
DeleteFather has sold property in October 2010. The Sale proceed is in Savings acccount. If the tax has to be paid, when should the tax be paid.
ReplyDeleteAlso can the amount be invested in an under construction house, which will be completed by September 2013 and still avail of CG tax exemption(3 year rule)?
Pls. advice.
As per rule , amount must be deposited in Capital gain account scheme .As you have not kept the money in required account so you are not eligible for deduction.
DeleteFurther if you have invested the money in CGAS then yes , you can invest money in under constructed house which can be completed with in three years.
This comment has been removed by the author.
ReplyDeleteAs the house holding period is less than 3 years , So it will be short term gain . And as per rule you can't save this capital gain tax .
Delete.
ReplyDeleteDear Raja Babu,
ReplyDeleteI plan to sell a flat. Registry carries a cost of Rs 23,70,000/-. But builder also charged me Rs 1lac for parking, Rs 66,000/- for one time lease (90 yr lease from Govt.) Rs 2,24,000/- as registration charges, Rs 50,000/- for maintenance deposit, Rs 50,000/- for Power Backup. That amounts to Rs 28,54,000/-.
For indexing purposes should I use the total amount?
Thanks regards
lease amount/parking/registration charges can be added .However maint. charges and power back up charges can not be indexed .
DeleteThough you can take separate money from buyer for power back up and maint, charges
Dear Sir
ReplyDeleteMy mother sold the property on 28th march 2012 and invested in capital again in april 2012
now for how long can she keep the investement
ie is cga for 2 years means 2 financial years or 2 years from date of sale
28 march 2012 - 28 march 2014 or
28th march 2012 - 28th march 2013
which is the last date to claim exemption
regds
CGAS is not an investment scheme or capital gain saving scheme it is a interplanetary arrangement . You have to invest the amount in new property before cut off time. so investment in this account can be withdrawn to invest money in house .
DeleteSo first ,pls tell under which section you have claimed exception. If want to construct house then money can be retained in this account 3 year from transfer of old property .and if you are interested in purchase of new residential property then you have 2 year period .
period start from 28 .03.2012 and ends on 27.03.2014/15 as the case may be.
Further if you are not able to use the money to purchase the new house property then the remaining amount will be taxable i your hand.
one property purchased on 16/3/12 from the advance of the property to be sold
Deleteproperty sold on 28/3/12
then the capital gain was done in april 2012
then the next property was purchased on aug 2012 with relevent withdrawls from cga { all requisite forms filled pre and post withdrawl }
still money is left for the purchase of third property which we want to know , how long can we retain the amount for purchase of ready property in resale { no construction }
thanks for such an prompt answer
oh, Rachni Ji,
Deletepls tell what you have sold (residential house ) or other long term asset .
Further you can not purchased multiple properties to save capital gain.
if you are covered under section 54 then only one property will be considered for capital gain exemption.
further u/s 54F ,if you buy two properties then no benefit can be claimed at all .
so pls clarify which section you have availed ,what was sold what price,what was capital gain , how much invested in two properties,and what is balance in CGAS
this we consulted and we are told that multiple properties can be purchased as the property sold was of big value and the clause says " purchase of a property " and not one property . there are many instances where multiple properties have been purchased by the seller . its not one property in the written clause , but " a " property .
Deletethis i am sure and have cross checked many a time and there is no confusion
for purchase of 3 properties the total amount is approx 1/3 for each property and third is still to be purchased
yes,you are correct but ............
Deleteany how as already explained you that you can retain money for two years from date of transfer of old asset .
i.e 27.03.2014.
before this date you have to invest in third property
off topic , you are a blogging very regularly , my suggestion to you that you should combined all the blogs ,if possible.
DeleteDear Raja Babu,
ReplyDeleteI have sold two properties. Can I buy one single property to save LTCG? Or do I have to purchase two separate properties? Thanks
yes, you can purchase on residential house to save cAPIAL gain from sale of two properties .
DeleteDear Raja Babu,
ReplyDeleteI have sold a flat in June 2012. I want to claim exemption on Capital Gain but I have not yet decided whether I will buy a house or construct it. Is it necessary to decide this before filing return ?
Can I use above Capital Gain to construct a house on a plot which was purchased 5 years ago ?
Thanks
TCB
No it is not necessary to decide the option to buy a new house or construct a new house.However you have to deposit the unused capital gain amount in CAGS before return filing due date . Further you can buy new house by June 2014 (2year from sale of flat)or you have to construct new house by June 2012 (3 Year)
DeleteYes, you can construct house on plot purchased earlier and cost of plot is also to be included to calculated the construction cost/investment .The main condition is that house must be completed with in 3 years
Dear Raja Babu,
DeleteThanks for your reply.
In the above querry, the flat sold in June-2012 was on only my name (single holder). But the plot which was purchased 5 years ago, had my mother as first holder and myself as second holder. My mother and myself had contributed 50% of the purchase price.
If I construct a house on this plot before June-2015, can I claim exemption from capital gain on selling flat ?
TCB
No such clear guidelines in Act , but in my opinion yes you can construct house on this land also but 50 % cost of land will be taken towards investment under 54 .
DeleteYou may take second opinion
Dear Raja Babu,
ReplyDeleteI have sold a flat in June-2012 and want to save long term capital gain tax. I have an offer to purchase a house which has already been built, but some legal / government approvals are still pending. I have to pay the price of this house based on a notorised "Satakhat" which probably means "Agreement for Sale" in english. Registered "Sale Deed" ("Dastavej") will be made only after getting the pending Legal / Government approvals which may take more than a year.
Please tell me the following :
If I pay the price of the house in next two months based on the "Satakhat" and later if the "Dastavej" is NOT made before June-2014, will I have to pay long term capital gain tax on the sale of flat ?
Thanks
Thakkar
If you purchased a house and got the possession of house also then it will be treated as deemed transfer u/s 53A of transfer of property act.So in our view you will remain eligible even if you fail to got registered the house by June -2014
DeleteAny how ,as you have said that ,transfer is expected in one year ,so be positive
Dear Raja Babu,
DeleteThanks for prompt reply.
As the house is already built, I will get the keys i.e. physical possession, immediately after paying the price in two months. Is there any document to be obtained to prove that I have got possession of the house ? If yes, which document and from whom/where ?
Thakkar
Dear Raja Babu,
ReplyDeleteI have sold a flat recently and made some long term capital gain. I am planning to buy a plot costing more than the capital gain, before next return filing date. I want to construct a house on this plot before expiry of 3 years. If I do this, is it necessary to open Capital Gain Account ? If yes, how much money I should keep in this account (as capital gain would be fully invested in plot) ?
Regards
Chandresh
CGAS is to deposit unused capital gain amount . As you have already used amount more than capital gain , nothing is required to be deposited in CAGS
DeleteDear Raja Babu,
ReplyDeleteIs it true that according to Capital Gains Account (First Ammendment) scheme-2012, for an individual assessee, approval of income-tax assessing officer is required to close Capital Gain Account ? If yes, what is the procedure and how long does it take to obtain this approval ?
Regards
Chandresh
Approval was required since inception of the scheme to close the the CAGS account . How much time it will take ,you will know only after submitting of your application to AO.
DeleteI have sold a property after 3 years at 70Lack, purchased at 20L. Property was in joint name of myself and my mother.
ReplyDeleteIf we make 2 separate investments at different locations one in my name and another in my mothers name how would we be exempted under propert gain tax?
Considering all the sale amount is invested in 7:3 ratio between myself and my mother.
Regards,
Vijay
Dear Raja Babu,
ReplyDeleteBased on your reply on 5th November, 2012, I had requested the following information from you, which is still pending. Can you please provide ?
" As the house is already built, I will get the keys i.e. physical possession, immediately after paying the price in two months. Is there any document to be obtained to prove that I have got possession of the house ? If yes, which document and from whom/where ?
Thakkar "
Dear Raja babu,
ReplyDeleteBefore sale of property, can I add 2 joint names to the property, then sell to the builder and request separate cheques in 3 names, so we can then each individually buy 3 separate properties? Will that save capital gains tax as each individual will then pay tax on amount uninvested in property on their separate tax returns.
Thank you.
Dear Friend,
ReplyDeleteMy father expired in december 2010. he had a residential plot in his name which he purchased from HUDA. this property was transferred in my name in January 2011. After it was transferred in my name, I paid it's 3 installments in lumpsum. Now, I intend to sale this property. what will be the tax implications?
Surya
please inform when your Father had purchased this property
DeleteDear Sir,
ReplyDeleteI have sold plot in April 2012 for Rs. 13 lakh which was purchased in 1988 for Rs. 10000. How much capital gains tax need to be paid?
Presently I have deposited the amount of Rs. 13 lakhs in saving account.
I want to invest the amount for buying flat in Mumbai in near future say one year.
Do I need to put the amount in CGAS account? Is this account facility available in all banks say SBI? please advise.
Ano4Dec2012
We have a flat for 20 Lacs, lets say we sold it for 80 lacs and the captial gain was 43 lacs, now in that case my query is - If I invest the entire amount into a new property there wont be any tax right ? But what happens in case that from the 80 lacs received I invest in 2 properties 40 Lacs each. Will I still have to pay Tax due to capital gains. Please advise. " Does investing in 2 properties server as an exemption from tax on capital gains if the entire amount is invested ? "
ReplyDeleteIf property sold is a residential house ,then the case is covered under 54 and only capital gain amount is required to be invested in new house .
DeleteIn your case capital gain amount is 43lakh ,so you can purchase one house of 43 lakh for capital gain exemption and balance 37 lakh can be invested else where.Full sale consideration is not required to be invested .
If the property is greater than 20 years old, will tax reduce on Capital gains ? How about if the propert belongs to a Senior Citizen can we further save tax.
ReplyDeleteHypotehtical scenario 5 Lacs propert in 1990 now being sold at 1 Cr in 2012, belongs to senior citizen ? Please explain the tax that can be levied on captial gains ?
the answer to you question is yes ,old property will get more indexation value .but capital gain is taxed at flat 20 % for senior citizen also.
Deletefurther pls provide appox figure so that exact query can be resolved
Hi, I have recently sold my house joint property in my dad and my name i.e. June 2012 for 70 lakhs which was purchased for 25 lakhs in year 2005. Now the balance amount 70-25 = 45 is my capital gain. I intend to buy another under construction house in next 30 days. I have few queries please help:
ReplyDelete- Do I need to deposit this 70 lakh(selling value) or 45 lakhs(profit) in Capital Gains account?
- Can I keep money in my saving account and use it directly when purchasing any house.
- If I am using my saving account to keep this money and use it as per under construction payment plan... Can I keep it for 3 years.
- Can I purchase 2 flats using this money i.e. one in my dad and mine joint property and other in name of my wife and mine.
- If I buy 2 properties using this money but sell one without any gain and use proceeds for first property...Am I laible for any tax ?
regards
45 lakh is not you capital gain .your capital gain is calculated as under.
Deletesale price=70 lakh
less :indexed cost 25*852/497=42.85(497 is index for 2005-06 and 852 is index for 2012-13)
capital gain=70-42.85=28.15
to claim capital gain exemption you have to purchase new house for at least 28.15 lakh in joint name of you and your father.if this amount is unutilised till 31.07.2013(due date for filing return fy 2012-13) you have to deposit this balance amount in CAGS.
Balance amount (42.85) can be used/deposited as per you and your father's wish .
point wise answer is given below
- Do I need to deposit this 70 lakh(selling value) or 45 lakhs(profit) in Capital Gains account?
Only capital gain amount is required to be used to purchase new house and out of this only balance unused amount on 31.07.2013 is required to be deposited in CAGS
- Can I keep money in my saving account and use it directly when purchasing any house.
yes , you can but to answer given above.
- If I am using my saving account to keep this money and use it as per under construction payment plan... Can I keep it for 3 years.
No ,used amount of capital gain is required to be deposited in CAGS before due date of return filing.
- Can I purchase 2 flats using this money i.e. one in my dad and mine joint property and other in name of my wife and mine.
yes , you can use balance amount as you wish (other than capital gain amount)
- If I buy 2 properties using this money but sell one without any gain and use proceeds for first property...Am I laible for any tax ?
property purchased to save capital gain amount can not be sold
before three year .
However property purchased from balance amount (other than capital gain amount) can be sold and you are liable to short term capital gain .
i sold my house(actual my dad house)he died intestate, rs. 10 lakhs,if i can buy one flat within 1 year.can i pay capial gain tax?
ReplyDeleteDear Raja Babu,
ReplyDeleteIf I donate a property to an institution as charity (without receiving any money), do I have to pay any tax ?
Sir
ReplyDeleteThe unutilized portion in Capital Gains a/c is taxable after expiry of the time allowed. My query is how do you declare this in your tax returns i.e. under which head and how? For e.g. though it is to be taxed as Capital Gains, the LTCG schedule will be required to be filled, so do you put sale price, cost etc..? Hope I am clear.
Hi,
ReplyDeleteWe have got 15 lakh rupees from sale of old ancestral property and 45 lakh from sale of agricultural land (three brothers - the property is divided). Each indiviual thus has a capital gain of 20 lakh. To avoid long term capital gain of 20% as tax, what are the options that can be explored if each individual brother has his own home.
Pl reply.
sale price and capital gain is not the same thing ,you have to reduce cost price from the sale price . if the land is ancestral then you should indexed market value as on 01.04.1981 multi it with 8.52 .the
Deletefurther if land is agriculture rural land then there is no tax on it . if it is urban agriculture land then you have option to invest the amount in agriculture land ,new house or capital gain bond.
it is clarified that you can buy new house even though you have already another house to save capital gain ''
so you have three option
54B(agriculture land only)
54EC
54F
I have sold a flat on 26/06/2012 after owning it for more than 5 years. I wanted to invest the gain in 54EC Capital Gain Bonds of REC or NHAI to save Long Term Capital Gain Tax. But the prospectus of these bonds says that the bonds would be alloted only on the last day of each month. If I pay the money before 26/12/2012 (completion of 6 months from the date of sale of my flat), but the bonds are alloted on 31/12/2012, will I be able to save LTCG Tax ?
ReplyDeleteIn our view 54EC available to you even if bonds are issued on last day of the month. So in our opinion investment date /deposit date is valid
Deletedear sir
ReplyDeletewe have sold 2 plots. 1. as on 23-06-2012
2. as on 25-08-2012
we have received demand draft for sale proceeds and deposited in SBI. and subsequently withdrawn and used for personal purpose. on 1st one
On 2nd one, Demand draft received and deposited in a co-operative Bank which is registered as per co-operative societies act.
my query:
1. i want to get exempt from long term capital gain on entire 2 plots by purchasing of a flat.whether i have to invest net sale consideration or long term capital gain.
2. builder has agreed to reduce the price, if i pay the entire amount now. and possession of flat is given after 14 months.can i give lump sum amount now from giving cheque of co-operative bank to get exemption.
3. or shall i transfered from co-operative bank to capital gain account scheme before 31st July 2013 and give from this at stage wise.
Hi Sir,
ReplyDeleteI have found the 5 yr old bulding its around the cost is 55lakhs and i will go for 42 lakhs home loan out of 55lakhs. House owner have 7 lakh home loan and how he will get the tax benefit from that amount (he will open any capital gain account) and he have to plan to purchange other property some other place. Please advice to me how we can proceeds with this.
Thanks
ESR
your query is not clear
Deletedear sir,
ReplyDeletei have been gifted one property by my father last year and unfortunately he passed away..i want to sell this property
1.how can i save capital gain?
2.is this capital gain be treated as short term or long term?
3. can i purchase two property by selling this property?
pls provide following information.
Delete1.when your father has acquired this property.
2.what is the nature of property like residential house,plot ,commercial property etc.
Can i use the funds in capital gains account scheme to pay off my home loan
ReplyDeletepls ask query in detail,with full facts
DeleteI have sold my house in Nov 2010 and deposited the capital gains of 30 lakh into a capital gains term deposit before Mar 2011. I took a home loan for 45 lakh for purchasing another property around June 2010. Now I want to pay off the home loan with the funds in the capital gains deposit. Is this allowed as per the capital gains account terms?
DeleteI have an open plot and the sale is likely to take place in February 2013. If i do not opt do deposit the sale amount in Capital Gains A/C, within how much time should i re-invest the amount in the purchase of another property, so that I get the deduction from Long-Term Capital Gain?
ReplyDeleteYou have to deposit unused amount by return filing date ie, 31st july ,2013
DeleteOne query about CGAS. Is the capital gains amount to be invested in this account, computed after indexing the cost of acquisition of the asset or prior to it? For e.g. if cost of acquisition is 8 lakhs and sale proceeds are 25 lakhs, the LTCG without indexation would be 17 lakhs.
ReplyDeleteNow if the acquisition cost after indexation is 12 lakhs, then the LTCG post indexation would be 13 lakhs.
So, which of the two LTCG amounts - 17 or 13 - should be invested in CGAS? Thanks in advance for your clarification..!
We sold our property in Feb 2011. With part proceeds we bought a house in April 2011. The balance amount was Rs 15 lac. Since we couldn't find another property we deposited this amount in SBI capital gain account in Aug 2011. I have still not found a ready construction property to invest this amount. 2 questions
ReplyDelete1. Is it ok to invest this in an under construction property for which i will get possesion in 2 years?
2. If i decide to withdraw this amount from the bank for my personal use, do i have to submit any NOC from the IT dept?
Please guide me on this
(1) yes you can invest in under construction property ,but it should be completed with in 3 years i.e up to Feb,2014
ReplyDelete(2)yes you have to provide detail
hi
ReplyDeleteIf the amount received from the property sold is transfered to CGAS to purhcase the house in next two years and if the person dies ,can the nominee purchase the house or u have to pay the TAX .
Nominee can withdraw money and can use as he wish as amount is not taxable in his hand no need to buy any house .this is as per circular 743 dated 6.5.96
DeleteCircular No
:
743
Date of Issue
:
6.5.1996
Section(s) Referred
:
54 , 54F
Statute
:
Income-Tax Act
Sub: Taxability of unutilised deposit under the Capital Gains Accounts Scheme, 1988 in the hands of the legal heirs of the assessee
1. Under sections 54, 54B, 54D, 54F and 54G of the Income-tax Act, 1961, capital gain is not chargeable to tax if the amount of capital gain or net consideration has been utilised for specified purposes by the assessee within the stipulated period laid down in the relevant section. These provisions also provide for the deposit in specified Banks, etc., of the amount of capital gain which is not utilised by the assessee for the acquisition of new assets before the date of furnishing the return of income under section 139(1). The amount of capital gain already utilised for the acquisition/construction of new asset together with amount deposited is deemed to be the cost of new asset and, consequently, this amount is not chargeable to capital gain in the year of transfer of asset. The provisions of sections 54, 54B, 54D, 54F and 54G further provide that if the amount deposited is not utilised wholly or partly for the prescribed purposes, within the period specified, the amount not so utilised shall be charged under section 45 as the income of the financial year in which the period of two/three years (as prescribed in the relevant section) from the date of transfer of the original asset expires.
2. A question has been raised regarding the taxability of the unutilised deposit amount in the case of an individual who dies before the expiry of the stipulated period.
3. The matter has been considered by the Board and it is clarified that in such cases the said amount cannot be taxed in the hands of the deceased. This amount is not taxable in the hands of legal heirs also as the unutilised portion of the deposit does not partake the character of income in their hands but is only a part of the estate devolving upon them.
Sd/-
Mrs. Nishi Singh
Secretary
CBDT
[F. No. 225/266/95-ITA-II, dt. 06-05-1996 from CBDT, New Delhi]
Hi
ReplyDeleteWe have sold our house and mother wants to invest the same in new house to save TAX. I would like to take loan from bank and purchase the house jointly . In this case can my mother have second name and I have first name in agreement.
yes ,you should specify share of both the parties specifically
DeleteDear Sir,
ReplyDeleteI have sold a long term asset and purchased a residential house immediately for the equivalent value now after two years i wish to convert this house to commercial use without transfering or selling the house to other parties, will i loose my eligibility under sec 54 of the capital gains.
No clear rule available in this regard,so we can not comment
DeleteSir
ReplyDeleteMy father has a house in Ahmedabad constructed in 1954. We are four brothers . After expiry of my father in 1993 the house was transferred in name of my mother and four brothers. Now my mother is also expired in May 2012 and it is transferred in name of four brothers jointly. Now we all have decided to sold the house and the amount will be distributed to us in four equal parts. From which base year the capital gain tax will be accounted either from 1993 . 2012 or before that . The basic value of which year should be taken . If I invest in Capital Gain Tax Bond and pay the tax on interest then after how much period I can withdraw the said amount and at that time shall I have to pay the Capital Gain Tax . Can I purchase the property in joint name First my name and second my son or daughter's name. Can I distribute the amount in two properties Thanks. Can you give me reply on my mail
How I can given reply on email ,when the same is not provided ?
DeleteHowever point wise answer is given below.
1.Base year 1981-82 ,and you should take value of house as on 01.04.1981 (market value or cost which ever is higher)
2. Then you have to calculate index value
Value as per one X 852/100
3. take sale price minus selling exp-indexed value as per 2 above .This will be capital gain on sale of house.
4. Now calculate your share (1/4) from capital gain.
5.You can invest the capital gain amount(not net proceed) in capital gain bond for 3 years and on maturity no tax will be payable on capital gain.
6 or you can purchase new house on your own name only with capital gain amount.
7. You should buy single property to avoid any confusion
Sir
DeleteMy email address is
mehtamanmohan@hotmail.com
Please reply on my mail
Thanks
M N Mehta
Answer is already given above ,no need of mail id now.You can comment if any clarification required
DeleteSir
DeleteWe are four brothers sold a property of my father after his and my mother's death. I have follwoing questions
1. The amount will be divided in four parts. Shall we take cheque in each name of four brothers or joint name . We have opened joint account for this transaction .Can we take one cheque and then devide in 4 equal parts.
2. If I purchase an house/flat and the value is less then what I get from above Can I invest remaining amount in Capital Gains Account Scheme
3. The complete transaction and getting money from above transaction of selling my father's house will take two - three months. Can I purchase flat at present or shall I have to purchase after getting above money only. At present I saw a good flat and I want to purchase itAt present can I purchase from my fund and then I transfer above amount and show that I have purchase flat
Please clarify the nature of property
DeleteA) residential house
B)not a residential house
In case if I am getting money from more than one deeds of sale of properties within a span of 2 years, can I use the same account (CGAS)to deposit the funds in it multiple times? If yes how the track of timespan (2/3 years) per deposit is kept?
ReplyDeleteYou may open separate accounts
DeleteDear Sir..We sold out property and deposited 50lakh into CGA in Jan 2012. We now (Jan 2013) have found an aparment for 70lakh which will be ready sometime in 2015. We can pay full 70lakh (55lakh from CGA) now itself and register the apartment. Will be still be paying capital gain tax as the apartment will be ready to occupy only in 2015?. please clarify..thanks
ReplyDeleteyes , you have to pay capital gain tax as the house is not going to be completed with in prescribed time
DeleteSir,
DeleteThanks for your reply. I am going to get money from a property deal in 5 installments spread across 3.5 years. I am planning to re-invest the amount in one property in construction so that I can pay in installments my questions are
1. Is it possible to invest in this fashion w/o attracting tax?
2. Since it is crossing 3 year limit from the 1st payment I receive from the deal do I have to forgo the last installment?
3.Can I combine money that I may get from other property deal to buy the same property (within the acceptable time limit)?
4. Can I combine money that my wife will get from other property deal to buy the same property?
Dear Mr. Raja Babu,
ReplyDeleteI was an NRI and purchased a land in my mothers name in march 2010. I am planning to sell it now and use it for buying a flat. The flat is already identified. Can i directly get the amount from purchase of the land in my account and buy the flat? Will this be clarified as NRI money? How can i use the money for the flat? I will be buying a flat for 50 lacs. The money from the land is only 20 lacs. Rest 30 lacs i will be going for loan.
Dear Mr.Raja Babu,
ReplyDeleteI sold a property in Jan 2013 thereby gaining Rs.10 Lacs as Long Term Capital Gains.
In the year 2011 i had booked another flat and the registration was done on the same year. The flat will be ready for possession by March 2013 and i have about Rs.15 Lacs pending to pay to the builder. Can i claim deduction u/s 54 on this payment against my Capital gains of Rs.10 Lacs?
In my view ,yes you can claim deduction as the construction of the house is to be completed after sale of old property.
DeleteFurther if property sold is not a residential house then you must not have more than one house other than new one.
Thanks Mr.Raja Babu.
DeleteHI
ReplyDeleteMy father died in 2009 without will . After that we 3 brothers and 1 sister thru affidivate transfered the name in our mothers name. On the society share certificate , the name is of my mother.
After 3 years we sold the flat and received cheque in my mothers name.
Now we are going to distribute the amount equaly in 5 parts.
1-mother , 1 sister , 3 brothers.
Now who will pay the tax , individually or mother has to pay the tax and then pay the money.
2 bothers want to invest in house and 1 brother and 1 sister doesnt want to invest any where.
i have sold a property on 15th Feb 2013 for rupees 40 lac possession of property given. the said property is a residential house came from will of my grand mother which was originally bought for rupees 50000/-, construction done for five lac in 1985. the sale proceed are rupees 25 lac received on 15th feb2013 and i have also paid for registry charges which was 2,50,000 thousand rupees mentioned in registered sale deed. rupees fifteen lac received via pdc for 5 lac on 15th April 2015 and 10 lac on 15th Nov 2015 mentioned in registered sale deed.
ReplyDeletewhen will capital gain arise and at what amount?
I have 2 properties purchased at different time taking home loan.
ReplyDeleteI have re payed back balance home loan amount (Rs. 5,50,000/-) for the 1st one(purchased in September 2009)in August 2012. Now I'm selling the 1st flat with a capital gain of Rs. 7,00,000/- (taking CII into consideration). WIll LTCG amount be adjusted with the re payment of load amount?
Also, if I purchase another property investing all of the LTCG, and then sale the new property again after 3 years, what will be the tax implication?
Rgds,
Rajat
very informative thread ...Thanks to Admin
ReplyDeleteIn which banks CGAS opened is possible and convenient
ReplyDeleteThanks for sharing this information about Capital Accounts Collection. Because I didn't even know if for what is that. But in your article, I can now understand about this kind of service. You may also found more information about capital accounts here.
ReplyDeleteHello Sir,
ReplyDeleteI sold a property for 60 lacs last week .The buyer deposited the amount in my account using demand draft .Now its in my savings account.i am purchasing a flat by next month .(april 2013)
1) I need to transfer the amount immd to the cgas account?
2) or how long(maximum) i can keep the money in my savings account?
3) my purchase of property on april 2013 is for 40 lakhs. can i purchase another property for 20 lakhs to avoid the long term capital gain tax?
4) or else i need to pay tax for the remaining 20 lakhs?
Hi,
ReplyDeleteWe had Capital gain in May 10 and the funds were deposited into special account with a bank, kindly advice on the below:-
1. What are the applicable timelines for purchase of Flat/Construction in existing plot?
2. whether such new property can be bought to avail Homeloan & Capital gain benefits through joint ownership in specific ratio.
I brought a flat in 2007 from builder for 40 L and took loan of 36 L -- now catch is "as per "sale deed", property is registered for 16 L". I sold it in Dec-12 for 60 L and paid 32 L for loan outstanding and balance 28 L deposited into my SBI saving account.
ReplyDeleteNow question over here is, do I need to use 40 L or 16 L for calculation of capital gain calculation ?