Long term capital gain on house property not kept in capital gain account

This query is : Resolved

SREE PRAKASH (Querist)
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23 January 2024 Respected Sir
Please clarify the following
The sale of house property was in April 2023.The proceeds are kept in bank sb account. It was not transferred to Capital gain account scheme.The new house property will be purchased in March 2024.
The query is whether the exemption will be get even though it is not kept in Capital gain account
Please clarify
Thanks in advance

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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09 July 2024 Under the Income Tax Act, if you intend to claim exemption under Section 54 or Section 54F for capital gains arising from the sale of a house property, the rules typically require that the capital gains must be deposited into a Capital Gain Account Scheme (CGAS) before the due date of filing the income tax return. Here’s how it generally works:

1. **Section 54 Exemption (Purchase of Residential House Property):**
- If you have made capital gains from the sale of a residential house property, you can claim exemption under Section 54 if you purchase another residential house property within a specified period.
- The exemption amount is usually the cost of the new residential property purchased or the capital gains, whichever is lower.

2. **Section 54F Exemption (Purchase of Any Residential Property):**
- If you have made capital gains from the sale of any asset other than a residential house property, you can claim exemption under Section 54F if you purchase a residential house property within a specified period.
- The exemption is available on the investment made in the new residential property.

### Conditions for Claiming Exemption:

- **Capital Gains Deposit:** To claim the exemption, if the new residential property is not purchased before the due date of filing the income tax return (including extensions), the capital gains must be deposited into a CGAS.

- **Timeframe for Property Purchase:** The new residential property must be purchased either:
- 1 year before the sale of the old property,
- or within 2 years after the sale of the old property,
- or constructed within 3 years after the sale of the old property.

### Your Situation:

- **Sale in April 2023:** If you sold a house property in April 2023 and have not yet purchased the new property (planned for March 2024), the capital gains ideally should have been deposited into a CGAS before the due date of filing the income tax return for FY 2023-24 (likely by July 31, 2024, or later with extension).

- **Exemption Condition:** If the capital gains have not been deposited into a CGAS but are kept in a regular savings account, you might not qualify for the exemption under Section 54 or Section 54F unless the funds are transferred to a CGAS before the income tax return filing deadline.

### Recommendation:

- **Consult a Tax Professional:** Given the specifics of your case and the importance of complying with tax laws to claim exemptions, it’s advisable to consult a tax professional or a chartered accountant who can provide tailored advice based on your financial situation and ensure compliance with tax regulations.

By following these guidelines and seeking professional advice, you can better understand the implications and ensure that you comply with the requirements to claim exemptions under Section 54 or Section 54F of the Income Tax Act.