Tax on Deemed Capital Gain

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This discussion explores the applicable tax rate for a deemed capital gain. The assessee invested sale proceeds in the Capital Gains Account Scheme before filing their return. The question is whether the tax rate should be the current 12.5% (without indexation) or the 20% (with indexation) applicable at the time of the original property transfer. Guidance suggests the assessee can choose the more beneficial rate, but tax authorities are questioning the choice of 12.5%.

Subhash Jain

Subhash Jain (Querist)
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22 July 2026 Assessee had transferred property on 28-10-2022 which was purchased in FY 2012-13, Full amount invested in capital gain account scheme (CGAS) before filing of ITR on 07-06-2023. Amount was not utilized and Deemed Capital Gain accrued on 27-10-2025. Whether tax rate on LTCG applicable would be 12.5% (as per current law) or 20% (tax rate at the time of original transfer) ?

Please guide.

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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22 July 2026 Tax Rate Option: The assessee can choose the tax rate that is more beneficial between 12.5% without indexation (the current law) and 20% with indexation (the tax rate and method applicable at the time of the original transfer in October 2022), as permitted for long-term capital assets acquired before July 23, 2024.

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Subhash Jain

Subhash Jain (Querist)
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22 July 2026 Thanks sir,
But, as we are choosing 12.5% due to lower tax but the department is asking to pay @ 20% and asking us why not to pay @ 20% as tax applicable at the time of original transfer

CA.Pujah

CA.Pujah (Expert)
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23 July 2026 In such case "the unutilised deposit in the account is deemed to be long-term capital gains in the year in which the prescribed time limit expires.". So it has to be taxed in the year capital gain arise as per the provisions of the tax year.

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