• Financial implication of capital gain if property sold in March

Hi ,

I have sold my flat in march 2019. As this is the closing month of FY what will be the implications of this ? 
1.Do i have to pay capital gain tax before march end of 2019 ? and how can i buyout time as i have not decided on future investments.
2. Would i ll be eligible for tax exemption If i invest the money i got from the sale of my residential flat in an Commercial property ?

3. Does investing in property through SPV get tax exemption ? 

Thanks 
Kanishk
Asked 3 months ago in Capital Gains Tax from Bangalore, Karnataka

No you can pay tax even before filing your ITR but with a little bit of interest.

You can save tax in this scenario by either investing capital gain amount in another residential flat or by investing in bond's mentioned under section 54ec.

For investing in bonds you have 6 months and if you wish to buy residential flat within next 2 years invest the amount in capital gain account scheme of government and buy house within next 2 years.

You can't save tax by investing in commercial property or using spv.

If you need any further discussion you can try the phone consultation and I can even help you in filing your ITR.

Hope you find the information helpful if you do please rate it 5 and provide your valuable feedback for my improvement.

Thank you

Naman Maloo
CA, Jaipur
1486 Answers
16 Consultations

5.0 on 5.0

Hi,

- Investment in commercial property does not qualify for exemption.

- For tax saving, only two options are available,1) Investment in residential property or 2) Investment in bonds.

- For investment in residential property, time limit for purchase is 2 years and 3 years for the construction from the date of transfer.

- For investment in bonds, time limit is 6 months from the date of transfer.

- If you are unable to make investment before the date of filing of ITR i.e. 31.07.2019 then the only option left to save tax is deposit the capital gain in Capital gain accounts scheme otherwise you will be liable to pay tax alongwith interest.

- Exemption is allowed only when investment is made in your name.

 

Thanks

Vivek Kumar Arora
CA, Delhi
2520 Answers
112 Consultations

5.0 on 5.0

Hi

Firstly, investment options are:

  • Residential house property within 2 OR 3 years of sale (3 for construction) under section 54
  • Eligible bonds under section 54EC within 6 months of sale

You need to reinvest the capital gain amount in order to claim the exemption. If such investment is not made before 31st July 2019, you need to deposit the capital gain amount in Capital gain deposit account.

 

1. If you don't wish to reinvest the funds, tax needs to be paid in March 2019 itself keeping in view advance tax provisions.

2. No, it should be a residential house property.

3. No.

 

Lakshita Bhandari
CA, Mumbai
3056 Answers
139 Consultations

5.0 on 5.0

Dear Kanishk,

 

Hope you are doing well !!

 

1.If you wish to reinvest but has not been able to find a suitable deal you can deposit the amount in a special account known as Capital Gains deposit Accounts scheme of a bank before the due date of filing your return of income. 

Normally, the due date of filing income tax return is July 31 for the previous FY.

 

So, you can retain the capital gain in your saving a/c till the due date of the ITR filing.

 

There are numerous slabs and sections under which you can save on tax if you reinvest your long-term capital gains.

 

Section 54: Under this section, you can avoid tax on capital gains from the sale of a house property if you reinvest the money to buy another property. You can claim tax exemptions under this section if you buy the new property one year before the sale or two years after the sale. In case it is under construction, the new property should be ready within three years of the old property’s sale.

 

Section 54EC: You can claim tax exemption by using the amount you gain from selling an asset to buy bonds issued by NHAI and REC.The bonds should be bought within 6 months of the sale of the asset. The maximum amount you can invest in this way is Rs. 50 lakh. It will lock your money for 5 years.

 

If you do not wish to reinvest then pay the advance tax on or before March 2019. 

 

 

2.No, the new property must be residential house property.

 

3.No

 

Thanks & Regards,

Payal Chhajed

 

Payal Chhajed
CA, Mumbai
2217 Answers
24 Consultations

5.0 on 5.0

First if you don't deposit the amount in capital gain account by June then while filing the return of income you need to pay tax on entire Capital gain along with the interest.

However if you first deposit the amount in capital gain account and then withdraw it then it will be considered income of that assessment year and treated accordingly.

Thank you

Naman Maloo
CA, Jaipur
1486 Answers
16 Consultations

5.0 on 5.0

1. The capital gains will be taxable in the year of withdrawal. You will have to pay the taxes according to advance tax provisions.

2. The capital gains would be chargeable to tax in FY 2018-19. You will have to pay interest for non payment of advance tax.

 

For option 1, there would be extra compliance. The bank won't release the funds unless the jurisdictional Assessing Officer permits. You will have to apply to your jurisdictional Assessing Officer for the same.

For option 2, interest shall be charged @1% per month on tax amount. 

Lakshita Bhandari
CA, Mumbai
3056 Answers
139 Consultations

5.0 on 5.0

- If you choose to put money in CGAS and does not utilize it as per the law then you are required to pay tax in the year you purchased commercial property.

1) You need to pay only tax for the A.Y. 2020-21.

2) You need to pay tax and interest for the A.Y. 2019-20.

Vivek Kumar Arora
CA, Delhi
2520 Answers
112 Consultations

5.0 on 5.0

Hi

Answer to your Follow up  question

1.Whatever capital gain exemption is claimed by depositing money in capital gain account will be reversed in year of withdrawal and tax will be payable along with interest.

2.Since exemption is not available for investment in commercial property and if dont want to open capital gain account then pay the capital gain tax on sale transaction and you are free to utilize the sale proceeds the way you want.

 

Hope it helps

Swati Agrawal
CA, Mumbai
1044 Answers
4 Consultations

5.0 on 5.0

Hi Kanishk,

 

Hope you are doing well !!

 

Thank you for your kind words.

 

1. You need to pay only capital gain tax in the year of withdrawal. 

 

2.You need to pay tax and interest for the FY 2018-19 if you dont open capital gain account and keep the money in your saving account till June 2019.

 

 

Payal Chhajed
CA, Mumbai
2217 Answers
24 Consultations

5.0 on 5.0

you can mail me at canamanmaloo@gmail

 

we shall discuss further details there itself if you are interested.

Naman Maloo
CA, Jaipur
1486 Answers
16 Consultations

5.0 on 5.0

Hi Kanishk,

 

Hope you are doing well !!

 

You can share the details on below mail id:

 

jpayal.51089@gmail

 

Payal Chhajed
CA, Mumbai
2217 Answers
24 Consultations

5.0 on 5.0

Hi

Vivek Kumar Arora
CA, Delhi
2520 Answers
112 Consultations

5.0 on 5.0

Hi

 

If your query is still not resolved,you can get in touch via phone call.

 

 

Swati Agrawal
CA, Mumbai
1044 Answers
4 Consultations

5.0 on 5.0

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