It is required to utilise capital gains amount towards acquisition of property before filing of ITR. If you don’t, then this amount should be deposited in Capital Gains Account Scheme (CGAS) account opened in any bank
My friend had sold the property and kept the money in capital gains account and now he is buying a new property. He got to know that the bank directly transfers the amount from capital gains account to the seller’s account from whom one has bought the property. The property value is somewhat less than the capital gains amount and he wants to utilise the remaining amount from CG account to pay for the stamp duty. He asked the bank about the process, but their reply was confusing. It seems they also lack clarity. Please advise the legal process around it?
– Rutul Shah
By Sujit Bangar, Founder, Taxbuddy.com
The capital gains on sale of a residential property can save tax if you invest the sale proceeds for purchase of a residential house in India within two years of sale of original property (or one year before sale). This time limit is extended to three years after sale of original property in case the new property is being constructed by you.
It is required to utilise capital gains amount towards acquisition of property before filing of ITR. If you don’t, then this amount should be deposited in Capital Gains Account Scheme (CGAS) account opened in any bank. These can be either savings bank accounts or term deposit accounts with varying rates of interest. Amounts can be withdrawn from savings account anytime but not before maturity from term deposit accounts.
The amount from CGAS account should be utilised only for the purpose for which the deposit was made. Such purpose needs to be submitted to the bank in Form C. Through this, the depositor can inform the amount needed in cash and the amount to be paid directly to the seller of the property or anybody related to such transaction along-with details of such seller. The depositor can mention the amount of stamp duty to be paid in this Form C and bank can issue demand draft for that.
In case the amount of withdrawal from CGAS Account is more than Rs 25,000, then the deposit branch will make the direct payment through crossed Demand Draft to the person to which the depositor intends to make payment from withdrawal amounts. The bank has only to see the information about utilisation of the proceeds and cannot refuse withdrawal unless the depositor refuses to submit the details of utilisation of previous withdrawals to the bank in the prescribed Form C.