Capital gains account scheme

Dear Sir,

If the amount of capital gains (Rs. 30 lakh) is kept in a capital gains account B (term deposit) to be used for a construction of house within 3 years. If due to some reason that amount cannot be used for the designated purpose. What is the tax on the amount. I mean does the income tax department charge interest on the capital gains amount for the 3 year period? OR Is the capital gain amount taxed at 20% flat as would have been the case if tax was paid in the first year itself i.e 20% of 30 lakh which is Rs.6 lakh. Would be grateful for your clarification.

Regards, Sam

asked May 30 '11 at 20:46 by Sam 1666

Income Tax on capital gain will be applied if the amount is not used after three years. Tax rate will be 20% on capital gains, which will be 6 lakhs in your case.

Moreover whatever interest is earned in capital gain account scheme for these three years, will be added to your taxable income and will be taxed as per your slab rates.

answered May 31 '11 at 02:56 by Pankaj Batra 5.2k320

Thanks for the very useful info provided Pankaj. Carrying on from my previous query, I have another doubt. From the same sale of land , I have already invested Rs. 1 crore in bonds. (50 lakhs in REC before March 31, 2011 and 50 lakhs in NHAI in May 2011) to get exemption under section 54EC. The capital gain arose in Feb 2011. The remaining capital gain left with me is 30 lakhs for which the previous question was based. Can I still get the exemption if I place it in a capital gain account scheme? What I mean is whether we can claim the benefits of the bonds and the capital gain account scheme simultaneously. Thanks in advance. Regards, Sam
(May 31 '11 at 20:38) Sam
There is no income tax saving for amount invested in capital gain account scheme. These are account to keep capital gain for a maximum period of three years during which one may invest into a residential property to save income tax on capital gains.
(Jun 01 '11 at 03:20) Pankaj Batra
Thanks Pankaj. Perhaps my question was phrased vaguely. I do understand that the capital gains account is to keep capital gain for a maximum period of three years during which one may invest into a residential property to save income tax on capital gains. My doubt however is that, since I have already bought the 54EC capital gain bonds, can I still use the capital gains scheme to invest into a residential property within 3 years and avail the tax benefit of the two different sections (54EC AND 54F i guess) simultaneously. Regards, Sam
(Jun 01 '11 at 19:27) Sam
Income tax rules are silent on using both 54EC and 54F simultaneously. In finance terms, silence on something means its allowed. Still I would advise you to consult a senior CA or tax professional.
(Jun 02 '11 at 12:16) Pankaj Batra

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Asked: May 30 '11 at 20:46

Seen: 2,604 times

Last updated: Jun 02 '11 at 12:16