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Capital gain escape

Mihir (Wealth Manager) (5293 Points)

09 July 2013

The message title says it all.

What are the ways to escape paying capital gain tax?

A person sold a flat due to financial difficulty, and instead of purchasing another flat or investing in infra bonds or depositing in capital gain account of SBI, the person used the money to make ends meet.

What if he does not file the returns? If he files his return, he has to show the capital gain and tax will be payable, which he cannot pay. What are the chances that IT dept will send him the notice asking him to file the returns for the relevant year.

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8 Replies

C.A. Jignesh N. Mehta (C.A.) (1030 Points)
Replied 09 July 2013

the sale value is the key here.

the sale value & PAN is recorded while putting the document to registration & stamp duty.

if the amount is above 30 lacs or the limit which will be set by govenment to select scrutiny cases then the case will be selected for scrutiny.

Hence it all depends on sale value.

As far as income tax department is concerned / for the matter any law, it always favours the rich and not the poor / needy.

so all the best and may IT department help you, in case your case is selected for scrutiny.

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Mihir (Wealth Manager) (5293 Points)
Replied 09 July 2013

Thanks for replying.

The sale value is above 30 lacs. If he files ITR, he has to pay tax of about 9 lacs, which he cannot. Due to financial difficulty, he is using up the sale value to survive, and so cannot avail deductions u/s 54.

Additional info: he sold the flat this february 2013. Any concession in this respect? Maybe procrastinate the tax payable part to the next year.

C.A. Jignesh N. Mehta (C.A.) (1030 Points)
Replied 10 July 2013

I can understand his difficulty.

But he may face more difficulty if the case is selected for scrutiny.

options before him/her:

1. co-owner of the house - divide the tax liability

2. take loan to pay tax liability from some relative or friend

3. check whose pan number was given to registrar of flat / stamp duty office, that pan number will be selected for scrutiny.

4. try to invest in house -put his name and some other co owner - so that 54 exemption benefit can be availed. - some friend or relative - try to communicate with some construction friend - he might help.

else i dont see any other option - i think 4th option is best.

Mihir (Wealth Manager) (5293 Points)
Replied 10 July 2013

Thanks for your time.

He sold the flat in february 2013. Does he have to show this transaction in the return of AY 2013-14? Does he have to immediately purchase another flat before 31st March 2013? What if one sells the flat on 25th March 2013, and how does one show this in the return?

Amber Jain (Article Assistant) (206 Points)
Replied 11 July 2013

Hello Mihir,

It's not madatory to purchase the house immediately before 31/3/2013 rather he can purchase the flat till Feb 2016 but till he purchases the flat he has to deposit the amount of consideration in capital gain account scheme of government.

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C.A. Jignesh N. Mehta (C.A.) (1030 Points)
Replied 11 July 2013

Originally posted by : Mihir
	Thanks for your time. He sold the flat in february 2013. Does he have to show this transaction in the return of AY 2013-14? Does he have to immediately purchase another flat before 31st March 2013? What if one sells the flat on 25th March 2013, and how does one show this in the return?

Any transaction done on or before 31 march 2013 will have to be filed in return for A.Y. 2013-2014

Mihir (Wealth Manager) (5293 Points)
Replied 11 July 2013

Thank you all,

Sold the flat in february 2013. Has not bought any new flat on or before 31st march 2013. Now how will he file his return when he has not used the section 54 to get exemption from LTCG?

Is depositing in SBI-capital gain account same as using 54 exemption? If is not then how to file ITR without creating a tax demand?

What if he invests in another flat in 2014?

C.A. Jignesh N. Mehta (C.A.) (1030 Points)
Replied 12 July 2013

1. you can deposit the amount in a CGAS account by due date of filing return of income. if no new asset is purchased. if you deposit amount in CGAS then utilise that amount within 2 years from date of sale i.e. february 2015 for purchase of flat else feb 2016 for constructing a flat.

2. if you buy flat before due date of filing of return then you can claim exemption u/s 54.

now choice are yours.