Long term capital asset sale exemption

Long term capital asset sale exemption

I sold a capital asset (website) as per the following details: 

- Sale Agreement executed and registered on 28th October, 2014.
- First payment received on 2nd November, 2014 and final payment received on 7th January 2016.
- Funds were deposited in Capital Gain Account on 28th August, 2015 and rest on 12th July, 2016
- Funds are still in the CG account as I haven't found the right property. 

MY QUESTION: Is there  a time line to buy a residential property even after the funds are deposited in the CG account? 

P.S: As per my understanding, a capital gain account  is only a temporary arrangement to park your funds for 2-3 years and you have one of the following options to save taxes. 

1. Investment in residential property within a specific time frame (Section 54/54F)
or
2. Deposit funds under the Capital Gains Account Scheme (CGAS)
or
3. Investment in bonds (Section 54EC)

Asked 7 years ago in Capital Gains Tax

Dear Sir,

At the outset, I want to clarify that exemption of 54F is available only in the case of sale of long term capital asset.

Further, you need to deposit money in the cgds account before the due date of filing of ITR. Due date of filing of ITR for nom-audit Assessee is 31 July of the next year. Since, you have deposited money in the month of August, you are not eligible for the exemption.

Also, this money needs to be utlisi within 2 years from the date of sale of capital asset for the purpose of buying a residential house properly or within 3 years if you are constructing the property.

Investment in bonds needs to be made within 6 months from the date of sale.

Feel free to give me a call via call an expert option If you need more clarification

Thanks and Regards

Abhishek Dugar

CA CS B.Com

Abhishek Dugar

CA, Mumbai

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Yes you need to purchase a residential property within 2 years from date of sale or before one year from date of sale. The amount in CG is being kept to temporary postpone the payment of tax for purchase of property.

If the CG amount is not invested within a specific time in purchase or construction then the whole amount is taxable.

Shyam Sunder Modani

CA, Hyderabad

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The responses are much appreciated. I am posting some more details to get more clarity on the issue. Thanks in advance. 

Just to recap, here are the details of the transaction: 

- Website/Asset Sale Agreement executed on 28th October, 2014.
- Payments were received in 3 parts: 35% on 20th November 2014, 35% on 30th December 2014 and the balance 30% on 7th January, 2016. 
- The final asset transfer (domain name) was done after receiving the final payment on 18th February, 2016 
- The funds not utilized/spent were deposited in Capital Gain Account on 28th August, 2015 (Filing date was extended to 31st August, 2015 in assessment Year 2015-2016 ) and rest on 12th July, 2016. 
- Funds are still in the Capital Gain account as I am still looking for the right property. 

I have read the capital gain 54F clause on http://www.incometaxindia.gov.in/_layouts/15/dit/pages/viewer.aspx?grp=act&cname=cmsid&cval=102120000000036968&opt=&isdlg=1
and it clearly says "2 years after the date on which the transfer took place"

MY QUESTION: The 'complete/final' asset transfer took place after receiving the third and final payment on 18th Feb, 2016. So do I have 2 years from date of asset transfer i.e. 18th February, 2016? What would constitute as date of sale of asset? 

P.S: I have no confusion with regard to asset being a long term asset or not as it was almost 9 years old. Also, I have filed returns in 2015-2016 and 2016-2017 for interest earned and received refund also.

Asked 7 years ago

Sir in my last answer i mentioned the same thing that property can be purchased within 2 years from the date of transfer. The transfer in your case will be considered when the last payment was received i.e. 18-02-2016 and transfer took place.

Shyam Sunder Modani

CA, Hyderabad

1408 Answers

164 Consultations

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Talk to Shyam Sunder Modani

Dear Sir,

If the website was held by you for almost 9 years, then its a long term capital asset. However, the date of sale will be date of execution of sale agreement.

Receipt of consideration is just a follow-up action.

Feel free to give me a call via call an expert option If you need more clarification

Thanks and Regards

Abhishek Dugar

CA CS B.Com

Abhishek Dugar

CA, Mumbai

3576 Answers

183 Consultations

4.8 on 5.0

Talk to Abhishek Dugar

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