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tax planning - capital gain

manish shah (proporitor) (63 Points)

11 September 2010

friends , if person deposit Rs. 35 lacs in capital gain account scheme ( 54 F - being fund planned to be used for purchasing res flat ) & claimed exmption on LTG . now no usage is done so far - wants to withdraw for other use 3 years expired in aug 2010 - it will be tax as deemded cap gain -

my query is - can he reinvest in the same scehme and avial exmp 54f agsint such deemded cap gan - on planning that within next 3 years he will able to purhcase flat by using same money .

please reply with ref to section and cases if any . i am planning on case .

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8 Replies

Manoj BG (Tax Professional and in Service) (1795 Points)
Replied 11 September 2010

HI DEAR,

FROM ALL OF THE ABOVE, IT SEEMS THAT U INVESTED SUM OF MONEY 35 LAKHS IN CAPITAL GAIN ACCOUNTS SCHEME. AS PER SECTION 54F, ASSESSEE DESIRES TO CLAIM EXEMPTION UNDER SECTION 54F CAN INVESTED SALE CONSIDERATION IN OTHER RESIDENTIAL PROPERTY BY PURCHASE WITHIN 1 YEAR BEFORE OR 2 YEARS AFTER THE DATE OF SALE OR CONSTRUCT WITHIN 3 YEARS FROM THE DATE OF SALE, ANY OTHER RESIDENTIAL HOUSE PROPERTY. IF THE AMOUNT REMAIN UNUTILISED ON THE DUE DATE OF FILING OF RETURN, HE MAY DEPOSIT THE SAME IN CAPITAL GAIN ACCOUNTS SCEME AND SAME SHALL BE USED FOR 54F WITHIN THE TIME SPECIFIED UNDER SECTION 54F.

IF THE AMOUNT STANDING TO THE CREDIT OF CAPITAL GAIN ACCOUNTS SCHEME REMAINS UNUTILISED AT THE END OF SPECIFIED PERIOD U/S 54F, SUCH AMOUNT SHALL BE DEEMED TO BE LONG TERM CAPITAL GAIN AND SHALL BE CHARGEABLE TO LTCG TAX IRRESPECTIVE OF IF U REINVETSED THE AMOUNT STANDING TO THE CREDIT OF CAPITAL GAIN ACCOUNTS SCHEME AT THE END OF 3 YEARS AGAIN IN SUCH SCHEME. THE PERIOD FOR INVESTMENT IS FULL FLEDGED AND CONCLUSIVE AND SHOULD NEVER BE EXTEND BY THE REINVESTMENT OF SUCH SUM.

REGARDS,

MANOJ

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Vicky (CA, LCS,MCOM,) (136 Points)
Replied 12 September 2010

that was a nice try...........manish shah

manish shah (proporitor) (63 Points)
Replied 12 September 2010

my real query is can assesee avial exmption benefits of sec. 54 f agsinst deemded long term cap gain ( occured on account of non utilisatino of amount kept in cap gain scheme ) . if yes ,

- is it enough that after 3 yrs i.e. on maturity he renew the same deposits under cap. gain scheme so that being untilise it will taxed as deemded cap gain and on account of reivestment he will calim expmt 54 f

Vicky (CA, LCS,MCOM,) (136 Points)
Replied 13 September 2010

dear manish........as per sec 54F exemtion can be claimed only on transfer of long term capital asset other than house property.......in ur case what has happened is unutilised amt has become taxable due to its non-utilisation as deemed capital gains..(THEREFORE,DEEMED CAPITAL GAINS IN UR CASE DOESNT ARISE FROM TRANSFER OF LONG TERM CAPITAL ASSET OTHER THAN HOUSE PROPERTY.INFACT IT ARISES AS THE SAME IS UNUTILISED FOR THE PRESCRIBED PERIOD)..........accordingly,ur tax planning wont work in this case.......

Rahul Agarwal (Future CA) (217 Points)
Replied 13 September 2010

Agree with Mr. Manoj

It will be deemed capital gain and tax will be levied on it accordingly.

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Sunshine (Helping All) (10575 Points)
Replied 13 September 2010

yeah...it will be taxed as long term CG if the amount in the scheme is unutilised after 3 years....

manish shah (proporitor) (63 Points)
Replied 13 September 2010

thanks for replying on capital gain tax planning issue ( 54 f ) manish shah .

have nice day .

sairam ( CA -FINAL) (46 Points)
Replied 18 July 2012

In above case not avialabel as per section 54F only upto 3 years we are deposited amount is elgible during this we can purchase residential house /constructed house ( purchase house eligible before 1 year or after 2 years ) but construction elgible 3 years after transfer we are not elgible after 3 years time expire of this time we are taxable under capital gain