• Capital gain account money utilization

Sir my query is that, I sell flai in 2016 Oct and before 31 July 2017 itr return date transfer the long term tax amount in capital gain account scheme amount approx 33 lacs in Type A.the provision is to buy house in 2 years or construct in 3 years. My question is if (1). If after two years I am not able to buy house the money in type A account is taxable or I have to transfer it to to type B to get exemption as I get 1 more year for construction. (2) type A account is only for 2 years and type B is for three years(3) can I keep amt in type A for 3 years and used for construction not for buying(4) can I buy property for 20 lac and transfer remaining 13 lac to Type B and used for construction as only 2 months remaining for 2 year completion(5) some CA told me Type A is only for 2 years
Asked 2 years ago in Capital Gains Tax

Hi,

- I think Type A account is in the form of saving account and Type B account is in the form of deposit account. I don't think any such condition is related with Type A account.

- Limit of exemption expires after expiry of 3 years from the date of transfer if the amount in the account will remain unutilized.

Thanks

Vivek Kumar Arora
CA, Delhi
4063 Answers
338 Consultations

5.0 on 5.0

Hi

There must be misunderstanding. Type A account is only applicable to you. Money from such account can be withdrawn within 3 years for construction.

Type A is similar to savings account whereas for B is similar to a term deposit account.

Lakshita Bhandari
CA, Mumbai
5460 Answers
539 Consultations

5.0 on 5.0

Dear Sir,

Hope you are doing well !

Under the Capital Gains Account Scheme, you have the option to choose between two different account types. These include:

•Type A – CGAS Savings Account: This type of CGAS savings account is just like any other bank saving account. You will get the same rate of interest on your funds as you get for a normal bank savings account, and you can withdraw funds from it as lump sum or periodically, for purchase or construction of another property.

•Type B – CGAS Term Deposit Account: The CGAS type B account is a term deposit account where your amount is locked for a period of 3 years, starting from the date of transfer. The interest rate for this account is similar to that offered on a fixed deposit account by the bank. On maturity, Type B account can be transferred to Type A. If you wish to withdraw money from a Type B account before maturity, it needs to be first transferred to a Type A account, to initiate the withdrawal. A penal charge of 1% is also applicable.

As such,there is no time limit/conditions for type A account.

Lastly, if the amount not utilized remain in the Capital Gain Deposit Account Scheme even after a specified period of 2/3 years. In short, either you are not able to finalize the property or provisioned extra amount for property purchase. The 100% of the amount not utilized will be taxed as long term capital for the financial year in which the specific period gets over.

Thanks & Regards,

Payal Chhajed

Payal Chhajed
CA, Mumbai
5077 Answers
152 Consultations

5.0 on 5.0

Firstly the types of accounts for CGAS are -

- Account A: Savings account (validity 3 years)

- Account B: Term Deposit account (validity 2 or 3 years, your choice)

You may deposit your gain in any one type of account or even partially in A and partially in B, as you prefer.

In order to get the exemption, the utilization of the money matters, not the type of account. To purchase new property, total amount deposited in CGAS a/c must be utilized within 2 years, whereas in case of construction the time limit is 3 years.

The exemption u/s 54 can be availed for purchase or construction of only ONE residential property. So, you cannot claim benefit of purchasing one property and constructing another.

Hope your queries are resolved.

Deepesh Jhawar
CA, Kolkata
9 Answers

5.0 on 5.0

Hi,

As per law, if the amount invested in the Capital Gain A/c scheme is not used for the purpose it is meant to be then the same shall be taxable in the hands of the assessee.

Also, the law clearly states that the exemption shall be allowed only for 1 house property.

So, buying one and constructing one shall mean using the funds for two different properties whoch is not permissible under law.

We recommend you to identify the property you wish to invest in and choose the account type accordingly.

Hope your queries are resolved!

Siddhant Shah
CA, Mumbai
120 Answers
1 Consultation

5.0 on 5.0

Hi,

The utilization of the money is important to get the exemption and not the type of account.

Type A is more like a Savings account and

Type B is like a Term Deposit account

The exemption u/s 54 can be availed for purchase or construction of only 1 residential property.

Hope that clarifies.

Regards,

Nikhil.

Nikhil Khanna
CA, Mumbai
1428 Answers
19 Consultations

4.8 on 5.0

Hi

You don't need to transfer any amounts. Type A account is applicable to you. You may withdraw amounts for construction from this account within 3 years of transfer of the property.

Your CA is incorrect.

Abhishek Dugar
CA, Mumbai
3576 Answers
183 Consultations

4.8 on 5.0

Dear Sir,

Your CA is not correct as only Type A account is applicable to you.

Money from type A account can be withdrawn within 3 years for construction.

Karishma Chhajer
CA, Jodhpur
2387 Answers
20 Consultations

5.0 on 5.0

Hi,

For claiming exemption under Income tax act,utilization of property matters within stipulated time .Further it can be utilized for one property only(Either construction or purchase).Account type not at all matters.

In type A ,withdrawal is permitted as its like saving account.And type B comes with lockin period. So Type A is only applicable in your case.

Hope it clarifies.

Swati Agrawal
CA, Mumbai
1146 Answers
7 Consultations

5.0 on 5.0

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