We bought a residential property in June 2019. However, a brand new property couldn’t be bought towards it by the due date of September 2021. The complete capital beneficial properties quantity was deposited in SBI Cap Gains Account Scheme (CGAS) in July 2020. I’ve been informed that the capital beneficial properties quantity will likely be thought-about as taxable earnings within the monetary 12 months 2022-23. SBI is now asking for an authority letter from the tax assessing officer earlier than permitting the assessee to withdraw the quantity deposited below CGAS.
Will the LTCG quantity introduced ahead from FY2019-20 as taxable earnings in FY 2022-23 be handled as LTCG in FY2022-23? Also, what’s the process for an assessee to acquire the authority letter from the IT assessing officer?
—Name withheld on request
As per the provisions of part 54 of the Income-tax Act, 1961, the quantity deposited below the capital achieve account scheme must be utilized wholly or partly in direction of buy or building of the brand new residential property inside the specified interval of two years (in case of buy of property) or 3 years (in case of building of property) from the date of switch or sale of the property.
In case it isn’t utilized inside the mentioned time-frame, the unutilized quantity shall be taxable as capital achieve earnings within the 12 months wherein this era specified from the date of switch or sale of the property, expires.
We perceive that you simply had bought residential property (held for greater than 24 months earlier than sale) in June 2019 and had deposited the long-term capital achieve (‘LTCG’) in specified capital achieve account scheme with State Bank of India inside the prescribed timelines. Since you haven’t invested the quantity for buy or building of any property inside the prescribed interval, the identical shall be thought-about as taxable LTCG within the FY2022-23 (i.e. the FY wherein interval of three years from June 2019 is expired).
Further, as per Rule 13 of the Capital Account Scheme, 1988, as a way to shut the Capital Gain account the depositor must make an software to the deposit workplace within the specified kind together with the approval from the jurisdictional assessing officer of the depositor. Kindly notice that there are not any prescribed directions or pointers for acquiring the approval from the tax authorities.
You might accordingly submit an software earlier than your jurisdictional assessing officer. You must also present the small print of the residential property bought through the FY 2019-20, computation of LTCG earned from sale of the property, date of deposit of the quantity in Capital Gain Account Scheme, date of expiry of the desired interval for funding within the new property together with corresponding backup paperwork like buy and sale deed of the unique residential property, passbook of the capital achieve account and so forth.
The assessing officer might search any extra data or clarification (as he might deem match) and accordingly course of the applying.
Parizad Sirwalla is accomplice and head, world mobility providers, tax, at KPMG India.
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