Tax on long term capital gains on sale of a house property can be saved by investing them in a new house property.
But what if you sold the asset in the financial year 2014-15 but could not make it in time by 31st March 2015 to invest your gains?
If you have sold a residential house property in FY 2014-15 and earned long term capital gains, you can invest these gains by purchasing a house 1 year before the date of sale or by purchasing a house 2 years after the sale. You are even allowed to construct a house within 3 years from the date of sale. If you plan to purchase or construct your new house in the time stipulated, how do you go about claiming the exemption in your return for FY 2014-15? To be able to claim exemption on the capital gains you can park your gains in a Capital Gains Account Scheme before the due date of filing of Return. This deposit is proof enough for the tax authorities to believe your intention of using them to make a purchase of the new house property. As you finalize on the house you need to purchase in due course, the amount deposited by will help you get an exemption on your gains. These deposits need to be made before the due date of filing your Return, so these can be made after 31st March and you can still avail exemption on your capital gains.
Several banks have been notified to offer this deposit scheme and you can find out details of the scheme from any nationalized bank. You will have to go through formalities similar to opening a bank account. The deposits will also earn an interest; this interest income shall be fully taxable. If the amount deposited is not used fully for purchase or construction of the new house within the time mentioned – the unutilized amount will be treated as long term capital gain of the year in which the time period of maximum 3 years expires.
So do not worry if you haven’t been able to close in on your new house purchase – deposit your gains in the capital gains account scheme before its time to file your Income Tax Return for the financial year 2014-15.
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