Capital gain tax for unutilized amount in capital gain account

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Vijay

freelancer

23 Points Posted on 04 September 2024

Hi Everyone,

I need some clarification regarding the tax rate applicable to the unutilized amount in my capital gains account under Section 54F, following the closure of the account after the Budget 2024 changes. Below is a brief summary of my situation:

In May 2022, I sold a long-term asset and realized some capital gains.
In July 2023, I deposited the capital gains amount into a capital gains account.
As I was unable to purchase a property within the stipulated 2-year period and do not intend to construct a house, I closed the capital gains account on July 30, 2024.

Section 54F states that the unutilized amount in the capital gains account will be taxed as income of the previous year. Given that the LTCG rate effective from July 2023 is 12.5%, should I pay capital gains tax at 12.5%, or should it be calculated at 20% with indexation?

Thank you for your assistance.

Replies (2)

Quick Summary

This discussion clarifies the capital gains tax applicable to unutilised amounts in a Capital Gains Account (CGAS) under Section 54F, especially after recent budget changes. The tax rate for the unutilised portion depends on when the original asset was sold. If sold after 23 July 2024, the rate is 12.5% without indexation; if sold before, it's 20% with indexation. The taxable amount is calculated proportionally based on the unutilised funds relative to the net consideration.

Dhirajlal Rambhia

SEO Sai Gr. Hosp.

121551 Points Posted on 05 September 2024

No indexation benefit eligible over it.

Capital gain tax should be applicable at prevailing rate, i.e 12.5%.

Aashok Kumar Sharma

Finance/Compliance Consultant

77707 Points Posted on 07 November 2026

Taxed in the year the 3-year period ends:

• Sec 54F(4) / 54(2): any amount in the CGAS not used for purchase or construction within the prescribed period (2 years for purchase, 3 years for construction from the date of transfer) is taxed as LTCG of the previous year in which the 3-year period expires.

• The rate and computation follow the original transfer: if the original sale was after 23 July 2024, 12.5% without indexation. If before, 20% with indexation (as originally computed). For land or building acquired before 23 July 2024 (resident individual or HUF), the lower of 12.5% and 20% with indexation.

• Under 54F, the taxable amount is the proportionate gain: LTCG × unutilised amount / net consideration.

• Withdraw the balance from CGAS with AO approval (Form G).