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Assessee sold House property in October 2021 and availed Capital Gain exemption as follows:

LTCG                                                                  101 lakhs                                           

Exemption u/s 54:                                                                        

  Investment in bonds within July 2022      50 lakhs                                           

  Planned to buy land and build house        51 lakhs                                           

He did not deposit in capital gain account scheme. He had intentions of construction of house property and claimed above exemption.

In April 2023, he purchased land for construction for about 41 lakhs. In Feb 2024, he decides he does not want to go through with the construction of house property and instead he is planning to sell it in 2024-25 and surrender the 54F exemption claim for the land cost.                     

Hence he will be taxed in the following manner:                                                                                             

1. Rs.51 lakhs exemption u/s 54 becomes taxable in the FY 2024-25.                         

2. Short term capital gains arise on the sale of land purchased in April 2023.         

He is also planning to make payment of advance tax towards tax on Rs.51 lakh to avoid possible interest liability.

Whether this approach is correct? Or should we edit the AY 2022-23 returns through updated returns and remove 54 exemption and rework tax liability including interest for that year?

He is getting a good price for the land he purchased.

You sold property on October, FY2021-22. The consideration had been invested into bond Rs.50 lakhs rest of the amount Rs.51 lakhs have not been deposited yet. But, you claimed capital gain exemption right. But before filling your return FY21-22, it has to be deposited on term deposit or ordinary savings account. Did you deposit atleast in your savings account? 

It will be considered as deposited. Then you will have a time to buy a property for construction 3 yrs. FY2021-22, FY22-23, in FY2023-24, you bought a land for construction but not constructed residential house. Now you are willing to this property for good price. 

Now, you will earn gain then use the same 54 exemption term. Everyone usually do this.

If you don't want to claim your exemption, you will levied for consideration amount for current FY23-24.

If the same you want to reverse your capital gains FY21-22, you will be levied a huge amount of tax. Tax officials take your case for scrutiny and ask you to prove your genunity. No intention of tax evade. 

Don't do anything against you. Please consult with your chartered accountant or tax accountant. 

Thank you for the quick reply. My doubt was mainly due to non deposit of Capital Gain in CGAS account. The subsequent charge to capital gains after three years from date of deposit.. will it apply only if deposit is made? 

Usually, when buying or selling with consideration, the amount should be deposited into seller account. You used part of amount invested into bonds rest of the amount you should have kept in the same account know. Then please approach your banker.

Banker provides two types account for CGS scheme. Either, you can keep money on savings account or CGS account.

Please consult with Banker. 

What is Capital Gains Income and Why is it Taxable?

long termCapital gains income is the money that you earn from selling an investment. The capital gains tax in India is levied on the difference between the price at which an asset was bought and sold, or if it's held for more than a year. In other words, if you buy something for Rs 100 crore and sell it after a year at Rs 105 crore (or Rs 1/5 of its original cost), then as per tax law you would have made capital gains of Rs 5 crores (Rs 50 lakhs). These are called long-term capital gains since they remain locked up with your investments till they're sold off by either yourself or third parties like brokers etc.

Calculation Of Capital Gains Income And Taxes On It

1. Calculate capital gains income.

Capital gains are the difference between the price at which you sell an asset and its cost basis, or the amount paid for an asset if purchased.

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