Capital gain account

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Querist : Anonymous

Querist : Anonymous (Querist)

18 December 2012 I have sold a flat recently after owning it for more than 5 years. I want to buy a plot of land costing more than the capital gain got by selling flat. I want to construct a house on this plot within a period of 3 years of selling the flat. Please tell me the following :
1) Do I have to keep any money in Capital Gain Account till I construct house on plot ? If yes, how much ?
2) After construction of the house, do I have to get any document/certificate from any authority to prove to the income-tax officer that the house has been constructed ?
Thanks

Amol S Joglekar

Amol S Joglekar (Expert)

18 December 2012 If the sale proceeds of the capital asset are not invested in the new capital asset before the due date of filing of your return (mostly 31/07/2013 in your case), then the non invested portion of the sale proceeds if any be kept deposited in the capital gain account.

Querist : Anonymous

Querist : Anonymous (Querist)

19 December 2012 Thanks for your reply.
I will buy the plot before 31/07/13. But construction on it will be done later and will be completed before 3 years of selling the flat. The plot costs more than capital gain on selling flat. In this case, do I have to deposit any money in Capital Gains Account ?

Amol S Joglekar

Amol S Joglekar (Expert)

19 December 2012 No. as the entire sale proceeds will be invested in the plot.... Make sure your construction gets over before 3 years from the date of transfer.

Querist : Anonymous

Querist : Anonymous (Querist)

19 December 2012 Thanks for your reply.
Kindly clear my following doubt.
I understand that the purpose of depositing unused capital gain in Capital Gain Account is to enable Income Tax Department to make sure that the deposited amount is used only for buying or constructing a house.
But, in my case, if I do not open Capital Gain Account, then how will Income Tax Department know whether I have constructed a house on the plot or not.

Amol S Joglekar

Amol S Joglekar (Expert)

20 December 2012 Why? Are you not going to file the return of income? File the return of income showing the investment under capital gain.

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