Capital gain deposit account and tax

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

03 June 2017 I purchased one residential house (say new house-A) on June 2015 with my mom (co owner and co borrower) via loan. At that time we lives at another residential house( say house- B) which was in the name of my death father.
On april 2016 house B had transfer/namantaran as a legal heirs in the name of me, my mother and two sisters ( total 4 legal heirs without any will). And then sold that house -B on April 2016 and repay entire loan which was taken for purchase new house- A.
Query is that We(me and mother) purchase new house-A at 14 lacs in total and capital gain on sale of house-B is 4 lacs.since we purchase new home-A within 1 year (on june 2015)from sale of old B house(on april 2016) then is it compulsory to open capital gain deposit account to avail sec. 54. Since cost of new house per head is 7 lacs and capital gain per head is 4 lacs,then is there no need to open capital gain deposit account??

Querist : Anonymous

Querist : Anonymous (Querist)

05 June 2017 Dear experts, please do reply soon.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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18 July 2024 Based on the scenario you've described, let's address the queries regarding Section 54 and the Capital Gains Deposit Account:

### Scenario Overview:

1. **Purchase of House A**: You and your mother purchased a new residential house (House A) in June 2015 for a total of Rs. 14 lakhs.

2. **Transfer of House B**: House B, which was previously owned by your deceased father, was transferred to you, your mother, and two sisters in April 2016 as legal heirs. Subsequently, House B was sold in April 2016, resulting in a capital gain of Rs. 4 lakhs per legal heir.

3. **Utilization of Sale Proceeds**: The entire sale proceeds from House B were used to repay the loan taken for the purchase of House A.

### Understanding Section 54 Exemption:

- **Section 54 Eligibility**: Section 54 of the Income Tax Act allows individuals to claim exemption from capital gains tax if the gains are invested in purchasing or constructing a new residential house property within certain timelines.

- **Timeframe for Investment**: You must purchase the new house either 1 year before the date of sale of the old property (House B) or within 2 years after the date of sale.

### Capital Gains Deposit Account (CGDA):

- **Purpose of CGDA**: Normally, if the amount of capital gains (Rs. 4 lakhs per legal heir in your case) is not utilized for purchasing the new house before the due date of filing your income tax return (i.e., typically by July 31 of the assessment year), you are required to deposit the unutilized amount in a Capital Gains Deposit Account Scheme before the due date of filing the return.

- **Exemption without CGDA**: However, if the entire amount of capital gains is utilized for purchasing the new house within the stipulated time frames (which seems to be the case here, as you purchased House A in June 2015), then there is no need to open a Capital Gains Deposit Account.

### Conclusion:

Based on the information provided:

- Since you purchased House A within 1 year before the sale of House B (April 2016), you meet the timeline requirement for Section 54 exemption.
- The entire amount of capital gains from the sale of House B was utilized to repay the loan taken for House A.
- Therefore, you do not need to open a Capital Gains Deposit Account (CGDA) because you have utilized the entire capital gains amount for the purchase of House A within the specified time frame.

Make sure to retain all relevant documents, including sale deed, purchase deed, loan repayment details, and calculation of capital gains, for your records and for filing your income tax returns. It's always advisable to consult with a tax advisor or chartered accountant for personalized advice based on your specific circumstances and to ensure compliance with tax laws.

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