How to avoid capital gains tax

Hi Sir/Madam

Me and my brother sold a property in April last year(2014). Now I have heard that one must declare in the IT return this year. I have been looking to buy a property since last year; however have not finalised it yet. 

Do I need to put that money in the Capital Gains account to avoid any tax on it or just leave it in the savings account where it is already as I should be able to finalise on the property this year?

Please help.

Regards

Sharma
Asked 1 year ago in Capital Gains Tax from Noida, Uttar Pradesh
The capital gain arising may be saved if the person in whose hand capital gain tax is chargeable purchases a residential flat within 1 year before the transfer or 2 years after the date of such transfer . If he wants to construct the new residential house it can be done within a period of 3 years after the date of such transfer .  Further the law allows to park the proceeds in a separate account till than it has been so used .
For doing all the above , you must show the transfer and the capital gain arising therefrom on the ITR and then claim relief under various subsection of  section 54 .  
In case of ITR , it can be revised , provided if you have time to park the fund in the designated account .
Prakash Sinha
CA, Delhi
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You have to deposit capital gains in capital gains account with any scheduled bank on or before last date of filing of Income tax return for asst year 2015-16 to claim exemption u/s 54 of I T Act.
Vijay N. Kale
CA, Hyderabad
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There is a difference between inheritance and acquisition. In your case since you have inherited property in 2014, the relevant year for determining capital gains is actual date of purchase by your mother or by whomsoever as the case may be.
Vijay N. Kale
CA, Hyderabad
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Hi Sharmaji

You need to deposit the amount in capital gain within 6 months. Now you cannot deposit the amount in capital gain account scheme and claim exemption. You cannot leave the same in Savings account.
Shyam Sunder Modani
CA, Hyderabad
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In the other query the cost to the previous owner will be the cost of acquisition i.e. cost on which it was acquired.

Also the year in which it was acquired by your mother will be taken as year of acquisition for long term capital gain purpose. You can put that amount in capital gain account within 6 months.
Shyam Sunder Modani
CA, Hyderabad
953 Answers
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Hi Sharmaji

I agree with Mr. Sinhaji, You can deposit the amount before the filing of returns or before due date i.e. 31st August 2015.
I thought that you are asking for investment in Bonds which date is within 6 months. Sorry for the confusion.

first of all whether you have filed your original return for A.Y.2015-16 or not, since you have written revise return file date.

Yes you can get exemption if you manage to buy property within 31st August. But first let me know whether you have filed original return or not.

Shyam Sunder Modani
CA, Hyderabad
953 Answers
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Yes you can deposit
Shyam Sunder Modani
CA, Hyderabad
953 Answers
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You can get exemption u/s 54 and 54F, if you invest in a residential house, u/s 54EC if you invest in capital gains bonds. If you have not invested in acquisition of a residential house u/s 54F, the amount should be deposited in capital gains account before the due date for filing your return of income, i.e., 31st August 2015 in your case.

As the property sold by you is inherited from your mother, her cost of acquisition will be the cost of acquisition for you also.
B Vijaya Kumar
CA, Hyderabad
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It is good compliance if money is deposited in capital gains accounts scheme on or before 31-08-2015 being last date notified for filing of return of Income as of now.  There is no such thing as within six months and then before last date which is not correct.
Further if you invest capital gains in the new house property on or before last date i e 31-08-2015 then you can claim exemption of capital gains u/s 54 to the extent of cost of the new asset.
Vijay N. Kale
CA, Hyderabad
248 Answers
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you can deposit the money with SBI in capital gains account scheme account.
Vijay N. Kale
CA, Hyderabad
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Yes the capital gains need to be shared between both brothers.

As per the Act, you need to get Income Tax clearance certificate from Income Tax Department for withdrawl of money from the Capital Gains Account Scheme. There are different views of different Banks. Some permit you to withdraw amount as per yours words, some ask for certificate and some ask for documentary proof of investing in other Property.

It is not easy to get certificate from Income Tax Department.

Actually SBI and some other Banks are asking for the certificate, but other Banks are permitting you to withdraw money.

Thus we suggest you to deposit in a Bank which is known to you.
Shyam Sunder Modani
CA, Hyderabad
953 Answers
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Yes nationalised Banks only offer capital gains scheme.

See there is no possibility that the person in the Bank will be same when you withdraw.

I do in Syndicate Bank in Hyderabad. It all depends upon your relation with Banker. No problem you can go ahead with SBI in which you have opened Account. At that time you can manage.
Shyam Sunder Modani
CA, Hyderabad
953 Answers
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No one can assure you of the same as it depends on Officer to officer and Bank to Bank.

You can get the IT Clearance certificate if having good rapport with Department in a weeks time as per my view.
Shyam Sunder Modani
CA, Hyderabad
953 Answers
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Its a question addressed to CA Modani.
B Vijaya Kumar
CA, Hyderabad
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The law  is very clear, the banks are appointed here to supervise the utilisation of money kept for purchase/construction of residential house property. It is incorrect that every time you withdraw you require certificate from income tax officer. It is only at the last withdrawal you have to obtain certificate  from Income tax officer. It is true that the withdrawal is for the purpose giving money to seller of a house in case of purchase and land and construction expenses are paid to respective vendors and bankers cheque will be given in the name of  concerned vendor . If you are confident that money will be used for acquisition of a residential house, then you need not be worried, only you have to fill up the form given by bank indicating the name of the party and purpose of the payment, and the bank or the income tax officer has no role in such payment.
Vijay N. Kale
CA, Hyderabad
248 Answers
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You are referring to Mr. Kale, Thus i think the question is for him. 
Shyam Sunder Modani
CA, Hyderabad
953 Answers
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Its a question addressed to CA Kale.
B Vijaya Kumar
CA, Hyderabad
290 Answers
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You can deposit even more. 
B Vijaya Kumar
CA, Hyderabad
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Dear

You can deposit more than the gain amount, no problem. You can put 21 Lakhs also
Shyam Sunder Modani
CA, Hyderabad
953 Answers
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Yes you need to obtain certificate from Income Tax Officer even if it is only one withdrawal. Why are you afraid of going to Income tax officer.
Vijay N. Kale
CA, Hyderabad
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The quantum of exemption is proportional to amount invested by you so it is not the preciseness of amount, but you can calculate quantum of capital gains with fair amount of certainty, then why you can not invest the precise amount derived by you.
Vijay N. Kale
CA, Hyderabad
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Is looks this question for Mr. Kale as it is in reply to some answer given by Mr. Kale in his Mail
Shyam Sunder Modani
CA, Hyderabad
953 Answers
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can you mail the same at modani005@gmail.com for further clarifications
Shyam Sunder Modani
CA, Hyderabad
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You have to file an application with the Income tax officer, having jurisdiction over your case.  Since you are living in noida, you have to contact office in Noida and get the authorization  from him to withdraw the money to issue cheque in favour of concerned seller. It should not take more than 30 days to get permission from the officer. The round figure can be nearest hundred over capital gain amount.
Vijay N. Kale
CA, Hyderabad
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please go ahead.
Vijay N. Kale
CA, Hyderabad
248 Answers
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Its a query addressed to CA Kale.
B Vijaya Kumar
CA, Hyderabad
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message to be forwarded to Mr. Kale sir on his personal ID
Shyam Sunder Modani
CA, Hyderabad
953 Answers
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If you wish to avail to exemption u/ 54 then you must deposit the money in capital gain accounts scheme.
Vijay N. Kale
CA, Hyderabad
248 Answers
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Its a query addressed to other CA?
B Vijaya Kumar
CA, Hyderabad
290 Answers
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You need to submit ITR 2. There is no minimum amount, you need to declare all.
Shyam Sunder Modani
CA, Hyderabad
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already answered
Shyam Sunder Modani
CA, Hyderabad
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you will have to submit return of income in ITR 2.
Vijay N. Kale
CA, Hyderabad
248 Answers
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You need to submit only ITR 2 - you cannot submit two ITRs. Go for e-filing with the help of a CA to avoid errors.
You can invest the amount of  Rs 21 L as already advised.  
B Vijaya Kumar
CA, Hyderabad
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