Ltcg tax exemption- timings

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

25 July 2013 I had purchased a flat in March 2005 and have sold it in April 2013. Flat was in my and my wife's joint name. Total LTCG is about Rs.1 crore. That we can either reinvest in a residential property within 2/3 years or in Sec 54EC bonds within 6 months is clear (if we want to save tax on LTCG amount). Questions are:
1. If we intend reinvesting in a new flat from a builder, when is the latest we are obliged to deposit the amount in Capital Gains Account Scheme (CGAS) account? Is it 31.07.2014 or earlier?
2. Supposing we buy a new flat then are we required to route all the amount through CGAS account or only the residual amount of LTCG as on 31.7.14 (or whichever is the latest date for CGAS as per question 1 above)?
3. Supposing new flat possession is scheduled to be handed over after 3 years i.e after April 2016, would only the amount that is paid to builder till April 2016 be eligible for tax exemption?
4. Do we need to declare anything regarding this transaction in our tax returns for AY 2013-14?

CA Siddhartha Bhardwaj

CA Siddhartha Bhardwaj (Expert)
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14 August 2013 1. In case you plan to invest in a house, then calculate capital gain. This capital gain amount should be invested.
The time limit to deposit in CGAS is due date of filing of return, which will be 31.07.2014

Deposit only the capital gain amount and NOT the whole sale consideration.

2. Since you have deposited only the capital gain amount, you have to route only such amount through CGAS. Make sure that the whole amount deposited is paid.

3. There is no implication in the return for the AY 13-14.
You have to show the capital gain and exemption in the return for the AY 14-15.

Querist : Anonymous

Querist : Anonymous (Querist)

15 August 2013 Thanks Siddhartha for your reply.If my capital gain is Rs.1 cr and I purchase a new flat for Rs.1 cr for which I pay an advance of rs.40 lacs now with balance payable as per following Schedule:
Rs.15 lacs on 30.9.14
Rs.15 lacs on 30.9.15
Rs.15 lacs on 30.9.16
Rs.15 lacs on 30.9.17
And possession of flat is on 30.9.17.
1. Is it necessary to route advance of rs.40 lacs through CGAS account?
2. CGAS account should have a credit Balance of rs.50 lacs as on 31.7.14-is this right?
3.since last 2 installments totalling rs.30 lacs would have been paid after 3 years from the date Of incidence of capital gain,would this amount be eligible for exemption?

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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03 August 2024 To address your queries regarding LTCG tax exemption and the reinvestment in a residential property, here’s a detailed explanation:

### **1. Timing for Depositing Amount in Capital Gains Account Scheme (CGAS)**

**Latest Date to Deposit in CGAS:**
- **Deadline:** If you intend to reinvest in a new residential property, the amount of LTCG should be deposited into the Capital Gains Account Scheme (CGAS) before the due date of filing the income tax return for the year in which the LTCG arises.
- **For AY 2013-14:** The return filing due date was July 31, 2014. Thus, you should deposit the amount into CGAS by **July 31, 2014**.

### **2. Routing Payments Through CGAS**

**Routing Through CGAS:**
- **Requirement:** You are not required to route the entire amount through CGAS. You can use CGAS to deposit the capital gains amount that you want to reinvest in a new property.
- **Residual Amount:** If you make partial payments to the builder and wish to use the CGAS, only the remaining LTCG amount that is not yet used should be kept in the CGAS. You must ensure that the total LTCG invested is properly accounted for and utilized.

### **3. Payments and Possession Timing**

**Payments and Tax Exemption:**
- **Payments:** For the amount paid to the builder, only payments made before the date of the return filing deadline (July 31, 2014) or within the period allowed for exemption will be eligible for exemption.
- **Possession Date:** If the possession is on September 30, 2017, only the payments made up to September 30, 2017, will be considered for exemption under Section 54. Payments made after the deadline will not be eligible for exemption.

### **4. Declaration in Tax Returns**

**Reporting in Tax Returns:**
- **For AY 2013-14:** You should declare the LTCG in your tax return and also mention the investment made in CGAS or the new property.
- **CGAS Balance:** Ensure you maintain a record of the CGAS balance and transactions. Report the capital gains and any deposits or withdrawals from CGAS accurately.

### **Additional Clarifications**

1. **Advance Payment:**
- **CGAS Requirement:** The advance of ₹40 lakhs does not necessarily need to be routed through CGAS. However, to ensure compliance, it is advisable to deposit the capital gains amount in CGAS and then use it for purchasing the property. This is especially important if the total capital gain is used over a period.

2. **CGAS Balance:**
- **Balance:** The CGAS balance on July 31, 2014, should be sufficient to cover the capital gains amount not yet utilized for the new property. Ensure that the balance reflects the LTCG amount you intend to reinvest.

3. **Exemption for Installments:**
- **Installments:** Installments paid after the deadline for CGAS or beyond the 3-year period from the date of sale may not be eligible for exemption. Only the amount paid up to the deadlines and the allowed period will be eligible for tax exemption.

### **Summary**

- Deposit LTCG into CGAS by July 31, 2014, or the due date of the return.
- Route at least the portion of LTCG not used in advance through CGAS.
- Ensure that payments made to the builder are within the allowed time frame for claiming exemptions.
- Declare the LTCG and any investment details in your tax return for AY 2013-14.

Always consult with a tax professional for personalized advice and to ensure compliance with current tax laws and deadlines.