07 December 2017
Sir I had invested the capital gain on sale of property in capital gain scheme in Feb16. Now I am not able to purchase property. The scheme period will mature in July2018. My question is that can i extend the FD under the scheme after 2 years? Or I have to give tax on the amount if I do not purchase property within time period of 2 yrs? Pl guide. Regards
07 December 2017
The maximum period of deposit is 24 months if you are buying. In the case of construction, a maximum period of deposit is 36 months as the case may be. That means extension of FD beyond that period is not possible. If you did not buy/construct the house property with in the above said time, you have to pay tax and obtain permission the ITO to close the CGAS,1988.
08 December 2017
Sir If I purchase the property in lieu of sale within 2 yrs then where I have to show in the return ? Can I purchase under construction property or ready to move property. Pl guide. Regards
01 August 2024
When you invest in a Capital Gains Account Scheme (CGAS) under Section 54 or Section 54F of the Income Tax Act after selling a property, there are specific conditions and timelines you must adhere to in order to benefit from tax exemptions. Here’s a guide on handling the investment and potential issues:
### **1. Extension of Capital Gains Account Scheme (CGAS) FD**
**Extension After 2 Years:** - The Capital Gains Account Scheme (CGAS) typically involves depositing the capital gains into a designated FD, which has a maturity period of up to 3 years. - **Extension:** Generally, you cannot extend the fixed deposit beyond the initial 3-year period. If the FD matures and you are unable to purchase a new property within the prescribed period, you will be required to pay tax on the unutilized amount.
### **2. Tax Implications if Property Is Not Purchased Within the Time Period**
- **If You Do Not Purchase a Property Within 2 Years:** - **Tax Liability:** The capital gains which you had deposited in the CGAS will be treated as taxable income for the year in which the 2-year period ends. - **Declaration:** You must declare this amount as short-term capital gains or long-term capital gains, depending on the nature of the original gain.
### **3. Purchase of Property**
**Timeline for Purchase:** - **2-Year Window:** You must purchase the new property within 2 years from the date of transfer of the old property to claim the exemption. - **Construction Property:** If you are buying a property under construction, the construction must be completed within 3 years from the date of transfer of the old property.
**Where to Show in Return:** - **Purchase of Property:** When you purchase the new property, you should report it in your income tax return under the section related to exemptions on capital gains. The details of the new property should be mentioned, including the amount invested. - **Form 3CD:** You may also need to report this in Form 3CD if applicable.
### **4. Types of Property Purchases**
- **Ready-to-Move Property:** You can purchase a property that is ready for occupation. - **Under Construction Property:** You can also invest in an under-construction property, but ensure that the construction is completed within the 3-year period from the date of transfer of the old property.
### **Summary of Actions**
1. **If Property Purchase is Delayed:** - **Tax:** If you are unable to purchase the property within the 2-year period, you will need to pay tax on the amount deposited in the CGAS. The tax should be declared in your income tax return.
2. **If Property Purchase is Made:** - **Report:** Ensure that the purchase of the property (whether ready-to-move or under construction) is correctly reported in your income tax return to claim the capital gains exemption.
3. **Consult a Tax Professional:** - Given the complexity of capital gains taxation and investment schemes, consulting a tax advisor or chartered accountant is advisable to ensure compliance and correct reporting in your income tax return.
By adhering to these guidelines, you can manage your capital gains effectively and ensure that you comply with tax regulations.
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