I bought a residential home in June 2019 and incurred capital beneficial properties. As per guidelines, an assessee investing the capital acquire quantity in one other property inside 24 months of the sale can save on capital acquire tax.
However, I’ve been unable to purchase a brand new home on account of lockdowns within the nation. Has the Central Board of Direct Taxes (CBDT) given any extensions on the time restrict of 24 months on account of covid-related lockdowns?
— Name withheld on request
Section 54 of the Income-tax (I-T) Act, 1961, supplies for deduction in opposition to long-term capital beneficial properties (LTCG) arising from the sale of a residential home (the unique asset). The deduction is offered the place the quantity of LTCG arising from such sale is both invested to buy one other residential home (new home) inside 1 12 months earlier than or 2 years after the switch of the unique asset or the identical is invested to assemble a brand new home inside 3 years of the switch of authentic asset.
The exemption shall be obtainable to the extent of LTCG invested.
It could also be famous that in case the quantity just isn’t so utilized earlier than the prescribed date of furnishing the return of earnings, the identical must be deposited with the financial institution underneath the Capital Gain Account Scheme (CAGS) for claiming the above deduction within the tax return and subsequently, the quantity so deposited could also be utilized throughout the specified interval.
Based on the obtainable information, we perceive that you weren’t capable of make investments the LTCG within the new home until June 2021. It is assumed that you just had nonetheless deposited the quantity of LTCG within the CAGS on or earlier than 30 September 2020 (being the prolonged due date for deposit of the unutilized funds for the aim of claiming deduction underneath Section 54) and have accordingly thought-about the deduction in respect of LTCG quantities so deposited whereas submitting your tax return for FY2019-20.
The CBDT had prolonged the final date of compliance to 30 September 2021. Hence within the instantaneous case, the 2-year interval for buy of the brand new home ends on 30 September 2021.
In case you haven’t been capable of buy the brand new home throughout the above-extended timeline and you wouldn’t be capable of full the development of the brand new home throughout the interval of three years from the switch of the unique asset, the quantity of deduction claimed by you for FY2019-20 shall be thought-about as taxable earnings for FY2022-23.
Parizad Sirwalla is accomplice and head, international mobility providers, tax, KPMG in India.
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