Hi,
I have an issue that I need help with regarding the payment of capital gains tax arising out of sale of a house property of my father. I am going to give as much detail as clearly as possible below.
1. A residential property was sold by my father in Aug 2017 for Rs.46 lakhs. The sale resulted in long term capital gains for my father of Rs.14,44,800 (after considering the cost of acquisition as per indexation as Rs.31,55,200).
2. Since the expectation at that time was to use the funds to buy another residential house, an account was opened under the CGAS (Captal Gains Account Scheme) in May 2018. As per someone's advice, my father deposited an amount of Rs.24 lakhs into this CGAS account, even though the actual capital gains works out to Rs.14.44 lakhs.
3. We had filed ITR-2 for AY 2018-19, where these details were declared and a deduction on the capital gains was claimed under Section 54F.. The screenshots of the AY1819 ITR-2 excel preparation software for the Sheet CG (Capital Gains) where these values were declared are attached.
4. Based on the above declarations and deductions claimed, no capital gains tax was paid at that time on the capital gains of Rs.14,44,800 received in FY2017-18.
5. However, subsequently, my father could not find any new house to purchase nor did he intend to construct a new house. Someone had advised him that new house property needs to be purchased within 2 years of sale of a property to get the benefit of the capital gains tax exemption. Given that no new property was purchased, they thought that the deadline for paying the tax on the capital gains was Aug 2019 (2 years from the sale of the property).
6. Hence on 7th August 2019, an Advance Tax of Rs.3,00,520 was paid by my father towards the tax on the capital gains of Rs.14.44 lakhs.
7. Now when filing the returns for AY20-21 (FY19-20), we need to be able to declare that the deduction claimed on the capital gains u/s 54F in AY18-19 is no longer valid and that we paid the applicable taxes that became payable due to the non-purchase of another property or construction of a new property.
8. In this year's ITR-2 preparation software, in the sheet for Capital Gains, there is a section B(10) which is for "Amount deemed to be long-term capital gains". In that section, sub-section (a) asks for the details of the unutilized capital gains that had been deposited into capital gains account in a previous year. Screenshot of the same is in the attached zip file.
9. Now, here is the problem. In the table, logically, we should have been to select "2017-18" in the column "Previous Year in which Asset transferred" and "54F" for the column "Section under which deduction claimed in that year".. In the Excel preparation software, it shows "54", "54F", "54GB" and "54B" as the options for the section. But if the year selected is "2017-18", then it does not allow us to select any selection other than "54B". The remaining 3 options (54, 54F, 54GB) are only allowed to be selected if the year is "2016-17". I initially thought this is some coding error in the Excel. So, I downloaded the Java preparation software. Even there, for 2017-18 selection in the year, the section dropdown defaults to "54B". Only if the year selected is 2016-17, the section dropdown allows one of 54, 54F andd 54GB to be selected. So, the restriction on selection of 54F for 2017-18 doesn't look like an error.
So, we are at a loss how to declare the previous exemption claimed in AY18-19 in this year's return so that the tax paid is also accounted for. If we are not able to appropriately declare the capital gains becoming due this year, then it will look like we paid Rs.3 lakhs as advance tax unnecessarily.
Can someone help us if we did something wrong and how to address this issue.
CAclubindia
