Section 54

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eshan khandelwal (Querist)
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29 October 2012 My uncle sold his house on 1 feb 2012. He put the entire consideration in his savings account.due date of return filing has passed and the amount is there only instead of capital gains account. He has never filed return in his life. What shud he do?

CA.Sourabh Sethia

CA.Sourabh Sethia (Expert)
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30 October 2012 Please provide further details

1. How much is the amount of Gains??
2. Is your Uncle has other Incomes ??
3. Details about the House??
and also amount of sale consideration, cost of acquisition and Date of acquisition

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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23 July 2025 Your uncle’s situation involves capital gains exemption under Section 54 of the Income Tax Act, and here's how to address it:

✅ Summary of Facts:
Property sold: 1 Feb 2012

Proceeds: Deposited in a savings account, not in a Capital Gains Account Scheme (CGAS)

Return not filed by due date (likely 31 July 2012)

No prior ITRs filed

❌ Issue:
To claim exemption under Section 54, the law requires:

Purchase/construction of a new residential property:

Purchase within 1 year before or 2 years after sale, or

Construct within 3 years after sale

If new property not purchased by return due date:

The capital gains must be deposited before the due date of ITR filing (Section 139(1)) in a Capital Gains Account Scheme (CGAS)

Since your uncle:

Did not deposit in CGAS before the due date, and

Did not file a return,

➡️ He may not be eligible to claim Section 54 exemption at this point if the capital gain is still unutilized.

✅ Options Now:
🔹 1. Check if new house was purchased/constructed later
If he has since bought/constructed a house within the allowed time (i.e., by 1 Feb 2014 or 2015), then:

He may still file a belated or updated return under Section 139(8A) (if eligible for that year now—need to check if updated return window is open).

Claim exemption under Section 54 if conditions met.

🔹 2. If no investment made yet, then:
Since the CGAS deposit wasn't done in time, and return wasn’t filed,

Section 54 exemption may be denied, and the entire capital gain becomes taxable.

He would need to file updated return (if allowed), pay tax + interest, and possibly penalty.

🔍 Important Note:
The due date for depositing into the CGAS is strict, and not depositing usually invalidates the exemption claim.

Courts have been strict unless genuine hardship or ambiguity is proven.

However, some tribunals have given relief where the property was actually purchased within 2 years, even if CGAS wasn’t used—so facts matter.

✅ What He Should Do Now:
Check if he purchased/constructed a new house within the time limit

Consult a CA to check if:

Updated return can be filed (possible under Section 139(8A))

Tax needs to be paid, and how much

File the return with or without exemption accordingly

Pay applicable tax, interest (234A/B/C), and late fee (234F)

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