Latest news with #CapitalGainsAccountScheme
Time of India
5 days ago
- Business
- Time of India
Can I get indexation benefit on renovation cost of my home without bill to save capital gain?
Our panel of experts will answer questions related to any aspect of personal finance. If you have a query, mail it to us right to the income tax rules, while calculating long-term capital gain on the sale of property, the cost of acquisition can include the original purchase price and cost of improvement, both adjusted for indexation . However, expenses claimed as cost of improvement must be supported by evidence, such as receipts or payment records, for these to be admissible. Since you lack documentation for the renovation expenses, claiming these costs in your income tax return without proof may be risky and lead to disallowance during scrutiny, if your case is picked up by the tax authorities. The valuer's report, based on fair market value as of 1 April 2001, provides a legitimate basis for the cost of acquisition, but excludes undocumented improvements. You are not legally bound to stick to the valuer's report; it's just one of the methods to determine the cost of acquisition as on 1 April 2001. Improvements after this date can be separately indexed and added to the cost base. It is advisable to mention these expenses clearly under 'cost of improvement' while filing the ITR, and keep a note explaining the nature, year, and justification for each, in case it's under Section 54 of the Income Tax Act, 1961, you can claim capital gains tax exemption by reinvesting the long-term capital gains from the sale of your ancestral property in residential properties. As per the 2019 amendment, the exemption applies to investment in up to two residential properties if the capital gains do not exceed `2 crore. Since you are purchasing two properties jointly with your wife, you can claim the exemption, provided all other conditions under Section 54 are met. These include reinvestment within two years or construction within three years. If you do not reinvest immediately, the amount must be deposited in the Capital Gains Account Scheme (CGAS). Note that this exemption is applicable once in a lifetime. So, ensure compliance with all the a question for the experts? etwealth@
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Business Standard
30-07-2025
- Business
- Business Standard
₹6 Cr property sold, ₹0 tax paid-What the Income Tax ruling means for you
In a landmark ruling, the Income Tax Appellate Tribunal, Mumbai has allowed a taxpayer to claim zero tax on long-term capital gains after selling two Mumbai flats worth ₹6 crore—originally gifted by her husband. The exemption was denied by the tax authority citing intra-family transaction and clubbing provisions. However, the tribunal ruled that proper gift documentation, ownership transfer, and timely reinvestment into a residential property (even if purchased from her spouse) met all criteria under Section 54, making the exemption legally valid. Kavita Damani's claim for exemption under Section 54 of the Income Tax Act, 1961 was challenged by the assessing officer, who alleged that the series of transactions—including the purchase of a new flat from her husband—was a colourable device to evade taxes. However, ITAT ruled in her favour, noting: The flat sold was in her individual ownership, after her husband gifted his share through a registered gift deed in 2017. She was receiving rental income from the property post-gift and sold it in her own capacity. The sale proceeds were deposited into her own bank account, and the capital gains were declared and taxed in her name. She then purchased a new residential property from her husband through a properly documented sale agreement, including TDS deduction and stamp duty, satisfying the exemption conditions under Section 54. What the Law Says Under Section 54, if a person sells a long-term residential property and reinvests in another home within the stipulated timeline (1 year before or 2 years after sale), they are eligible for exemption on capital gains tax. Key point: There is no bar on purchasing the new property from a relative, including a spouse, as long as the transaction is genuine and duly documented. As Alay Razvi, Managing Partner, Accord Juris, explains: Kavita Damani won the case before the Income Tax Appellate Tribunal (ITAT), Mumbai, because she fulfilled the legal conditions required to claim exemption from capital gains tax under section 54 of the Income Tax Act . Section 54 clearly defines that if an individual or HUF sells a residential property and invest in another residential property , exemption can be claimed under Section 54 of the Income Tax Act, 1961 within a particular time: Purchase within 1 year before or 2 years after the sale, or Construct a house within 3 years after the sale. If the gains are not utilized before filing the return, the amount must be deposited in a Capital Gains Account Scheme (CGAS). In this particular case, the tribunal found no basis in the Revenue's claim that the transaction was a tax avoidance device. Razvi further explains Why her claim was upheld: She was the legal and beneficial owner of the property sold. The flat was originally in joint name with her husband, but he gifted his share to her in 2017 via a registered gift deed. Since then, she received the rental income and sold the property in her individual capacity, receiving the entire sale proceeds in her bank account. The capital gains were assessed in her hands, and hence she was eligible to claim exemption under Section 54. The new flat was purchased from her husband via a registered agreement dated 18 March 2021 for ₹3.85 crore. Although the husband was the seller, Section 54 does not bar purchases from relatives, and the transaction was genuine, with proper TDS deduction and stamp duty payment. The consideration was paid by 12 March 2021, well before the extended deadline under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA). The Assessing Officer alleged that there was just rotation of funds between the assessee, her husband, and their private company. But the ITAT found that the sale consideration was actually paid, and the timing and flow of funds were explained, showing no intent to evade taxes. Transaction Structuring Best Practices As Keshav Singhania (Head – Private Client, Singhania & Co.) advises: Undertake gift and sale transactions in separate financial years to maintain transactional hygiene. Always register gift deeds to affirm legal sanctity—even if not mandatory. Income (e.g., rent) from gifted property must be taxed in the hands of the donee after transfer. Keep a significant time gap between the gift and sale to avoid being deemed a tax avoidance arrangement. Maintain detailed documentation of fund flows for all transactions. Joint Ownership Dos and Don'ts In cases of joint ownership, ensure that: Each person pays for their share from their independent income source, with clear bank statement proof. Ownership stakes are economically genuine, not merely for formality. These practices help establish clear beneficiary ownership and support exemption claims. Section 54 Exemption Conditions Legal expert Alay Razvi (Accord Juris) outlines: The old property must be a long-term residential asset. The sale proceeds must be reinvested in a new residential property within 2 years. Buying from a relative—including a spouse—is permissible if the transaction is genuine and properly documented. Unused gains at filing date must be deposited into a Capital Gains Account Scheme (CGAS). Expert Checklist: How to Ensure a Clean, Tax-Exempt Real Estate Transaction Register gift deeds – Confirms legal ownership and avoids future disputes. Time gift and sale in separate financial years – Prevents tax authorities from questioning the intent. Invest capital gains within the Section 54 timeline – Buy another property within 2 years or construct within 3 years. Maintain complete bank statements and transaction records – Proves genuine fund movement and ownership. In joint ownership, pay from individual sources – Use separate bank accounts to establish economic ownership. Use CGAS (Capital Gains Account Scheme) if reinvestment isn't immediate – Keeps exemption claim valid even if property purchase is delayed. Document rental income shift post-gift – Helps reinforce the done as the real income owner. Avoid parking funds temporarily just to rotate them – Use them meaningfully to show genuine reinvestment. While gifting properties within families is not uncommon, this case highlights how timing, paperwork, and legal intent make all the difference. For taxpayers engaging in high-value property deals with relatives, this judgment serves as a crucial blueprint to ensure exemptions are upheld and tax liabilities avoided.
Time of India
25-07-2025
- Business
- Time of India
LTCG tax: Paying only 12.5% tax on Capital Gains Accounts Scheme withdrawals while filing ITR FY2024-25? Tax dept could soon raise tax demand
What is the Capital Gains Account Scheme? Taxation of the unutilized funds or premature withdrawal Academy Empower your mind, elevate your skills The Tax Rate Dilemma: 12.5% or 20%? Tax department's view Word of caution When one earns capital gains on selling a long-term capital asset (like a house, land or other capital asset) tax exemption on such gains can be claimed by investing the sale proceeds or capital gains in another specified asset (e.g., another house, land for agricultural purposes, etc.) within a specified time frame (usually within two or three years from the date of transfer). However, if the reinvestment is not made by the date the Income Tax Return (ITR) is due for the relevant financial year, one can still claim capital gains tax exemption by depositing the proceeds/gain amount in a Capital Gains Account with an authorised bank before the ITR filing Capital Gains Account Scheme (CGAS) is a special facility offered to taxpayers under the current income tax laws, allowing taxpayers to claim long-term capital gains (LTCG) tax exemption and defer reinvesting the gains in eligible assets. In order to claim the LTCG tax exemption, the amount deposited in CGAS has to be invested in eligible assets within a prescribed time period as outlined in sections such as 54, 54B, 54D, 54F, and 54G of the Income Tax Act (ITA). Under this scheme, taxpayers can deposit uninvested capital gains in a designated bank account and later use the funds for the eligible investment within the prescribed period, thereby availing tax residents can open CGAS accounts, while non-residents are required to open Non-Resident Capital Gains Account Scheme (NRCGAS) accounts to avail of the facility. Deposits can be made through cheque, demand draft, or net banking, either in a single payment or in instalments. The deposited amount must be utilized within a stipulated time to invest in the specified assets to retain the tax the deposited funds are not utilised within the prescribed period for the specified purposes, the unutilized amount is deemed as long-term capital gains in the financial year when the deadline expires. Consequently, the taxpayer becomes liable to pay tax on this deemed some cases, taxpayers may choose to prematurely close the CGAS account or transfer the unused funds. This requires prior approval from the relevant income tax authority, which grants permission only after ensuring that all applicable taxes have been duly is important to understand that the tax liability arises not due to transfer of a new asset, but because the exemption previously claimed stands ITA was amended through the Finance (No. 2) Act, 2024, introducing a reduced tax rate of 12.5% on long-term capital gains on transfer of capital assets made on or after July 23, 2024. This change led to uncertainty: If someone had deposited sale proceeds/capital gains from a sale that took place before this date in CGAS, but failed to utilize the funds within the allowed timeframe, would the applicable tax rate be the older tax rate of 20% or the new tax rate of 12.5%?To clarify, consider an example: Mr. A sold a property on August 1, 2021 (in FY 2021-22) and deposited the capital gains in the CGAS. However, he did not utilize the funds to purchase the specified asset before the CGAS deadline, which expired in August 2024, i.e. after the 12.5% rate came into effect. In this case, should the tax be levied at 20% (the rate applicable at the time of the original sale) or at 12.5% (since the gain is deemed to arise in a later financial year)?This scenario raises a key question: Will the applicable tax rate correspond to the year of the original transfer or to the year in which the exemption is withdrawn due to the income tax department has not released any circular or press release addressing the above question, however, the ITR utilities released for the financial year 2024-25 (assessment year 2025-26) are applying the tax rate of 12.5% on such deemed capital gains. This suggests that the department considers the gain to have arisen after July 23, 2024, which is subject to the new lower rate, i.e. as per the department, the applicable tax rate on deemed gains is 12.5%, not the earlier 20%.The department may have made this change intentionally. However, it's also important to keep in mind that if this change is made unintentionally, then the possibility of them updating the ITR utilities at a later date and raising a demand cannot be ruled author is of the view that the deeming provision means the tax event (expiry of CGAS period) is a statutory fiction to reverse a previously claimed deduction; it is not an actual new sale or transfer that would be eligible for the new lower tax rate has to be seen as related to the date of sale of the asset. Meaning thereby, the lower tax rate of 12.5% applies only to transfers of long-term capital assets made on or after 23rd July 2024. Where the asset was sold prior to 23rd July 2024 and the funds were not invested within the stipulated time, the gain is still taxed at 20%, since the taxable event is linked to the transfer date, not the deemed income is also important to remember that the 20% tax rate applies to long-term capital gains calculated with indexation, while the reduced 12.5% rate applies to gains without indexation. Therefore, applying the lower 12.5% rate to gains that have been computed using indexation would not even be logical, as the two are based on different methods of year, regarding section 87A rebate claimed by taxpayers, initially the ITR utility allowed the rebate, but was amended later to disallow it, and taxpayers were asked to pay the differential tax. Given this recent experience, it would be prudent for taxpayers to ensure that the correct compliance is done, thereby avoiding future tax complications.(The article is authored by Ashish Karundia, founder, Ashish Karundia & Co, a chartered accountancy firm.)
Mint
09-07-2025
- Business
- Mint
Your Questions Answered: How is capital gains tax calculated when I sell my plot of land?
The profit on sale of a plot of land is treated as long term capital gains if the plot of land has been held for more than 24 months, else the gains are treated as short term capital gains. The short term capital gains are added to your regular income and taxed at your slab rates. The long term capital gains are taxed at 12.50%. The resident individual who had acquired the plot of land prior to 23rd July 2024 has the option to pay tax either on unindexed long term capital gains at 12.50% or at 20% on indexed long term capital gains. You can save tax on capital gains made on sale of the plot only if the capital gains are long term in nature. No exemption is available in respect of short term capital gains. In case you are selling a plot which you have held for 24 months or more, you have two options to save tax on long term capital gains. Under the first option available under Section 54F you can claim exemption from long term capital gains if you purchase or construct a residential house within a prescribed time period. The investment in residential houses has to be made within two years. Even if you have already bought a residential house within one year before sale of the plot of land you can still claim the exemption. If you go for self-construction or book an under construction flat the construction has to get completed within three years to claim the exemption. For claiming the exemption, you are required to invest the full net sale consideration in one residential house. In case full sale consideration is not invested the amount of exemption available will come down proportionately. This exemption can only be claimed if you do not own more than one residential house on the date of sale of the plot of land. Please note that in case you are not able to utilise whole of the money for the above purpose by the due date of filing your return of income, you have to deposit the unutilized money in a Capital Gains Account under Capital Gains Account Scheme to be opened with a scheduled bank. You can use this money for the purchase or construction of the house within the required time period. The other option is available to you is under Section 54EC under which you have to invest in capital gains bonds of specified financial institutions like REC (Rural Electrification Corporation), NHAI (National Highway Authority of India), PFC (Power Finance Corporation), RFC (Railway Finance Corporation). Please note for availing exemption under Section 54EC you are required to invest only the plain long term capital gains and not the whole of the sale consideration in the bonds. Please note that since indexation benefit is not available now for claiming exemption, you will have to invest the plain long term capital gains. You can invest maximum up to Rs. 50 lakhs in these bonds during one financial year. There is also a restriction of Rs. 50 lakhs up to which you can claim exemption under Section 54EC in respect of one financial year. This investment has to be made within a period of six months from the date of the sale. The period of six months can even go beyond your due date of filing your return and you are not required to put the unutilized money in a capital gains deposit account. These bonds presently carry a coupon rate of 5.25% payable annually. This interest is taxable. Read all our personal finance stories here. Balwant Jain is a tax and investment expert and can be reached at jainbalwant@ and @jainbalwant on his X handle. Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
Mint
03-07-2025
- Business
- Mint
Your questions answered: How I claimed LTCG exemption as an NRI selling agricultural land
Q. I am an NRI. I sold my agricultural land at Pune in November 2023. After consulting my CA., I deposited the indexed capital gain amount in a Capital Gains Account with a nationalised bank as per Sec. 54B to purchase agricultural land within two years from date of sale. i.e. till November-2025. But as of today, I am not in position to purchase agricultural land. Is it possible to invest the entire capital gain amount in non-agriculture assets? Is it also possible to purchase agricultural land after November-2025 without having to pay the capital gain tax? Is there any other way for capital gain tax exemption? If the individual or an HUF (Hindu Undivided Family) wishes to claim exemption for long term capital gains rising on sale of an agricultural land the taxpayer is required to purchase another agricultural land within a period of two years. In case the amount is not utilised for buying agricultural land by the due date of filing of the ITR (Income Tax Return), the tax payer is required to deposit the unutilised amount in a Capital Gains Account under Capital Gains Account Scheme (CGAS) by the due date of filing of ITR. The amount deposited in the Capital Gains Account before the due date of furnishing returns of income along with the amount already utilised is deemed to be the amount utilised for the purpose. However, if the amount is not utilised wholly or partly for the buying of agricultural land, then the amount of capital gains related with the unutilised portion of the deposit in CGAS is charged as the capital gains of the year in which the period of two years expires. You have to buy the agricultural land by November 2025. Please note that under the FEMA (Foreign Exchange Management Act) laws an NRI (Non-Resident Indian) is not allowed to buy agricultural land in India without obtaining prior permission from the Reserve Bank of India. You cannot buy agricultural land after November 2025 for claiming the benefit. As far as claiming exemption by investing in another asset i.e. a residential house under section 54F now is concerned, I think you cannot claim exemption under Section 54F now as you would have already opted for section 54B exemption while filing your ITR for the financial year 2023-2024. In my opinion, the law does not allow you to change the option now and opt for section 54F which allows a longer time of three years from date of sale of the agricultural land. Read all our personal finance stories here. Balwant Jain is a tax and investment expert and can be reached at jainbalwant@ and @jainbalwant on his X handle. Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
