CGAS withdrawl and taxation rate under section 54F

Income Tax Income from Capital Gains
1

Hello - Need help with respect to Section 54F :

Let me share the scenario - I sold unlisted shares on Dec 1st, 2023 with some LTCG . I had deposited the money in CGAS account by July 31st, 2024 to utilise it under section 54F to buy some property. But now i don’t think i’ll be able to utilise it by Dec 1st, 2025. And neither I’m going to do any construction of house, so that is also ruled out. In between, govt has revised the LTCG taxation rate from 20% to 12.5%. Now questions are :

  • which rate of LTCG taxation will be applicable to me - the rate of FY 2023-24 or the rate of FY 2025-26 ?
  • also, which year surcharge and cess rates will be applicable?
  • And how much time typically AO takes to give approval to withdraw from CGAS account?

Thanks!!

@TeamQuicko

2

Hey @capitalgain

Let me answer your queries one by one:-

  1. As per our opinion, since indexation benefit was availed and exemption was claimed at 20%, it is reasonable to pay tax applying the 20% rate. Further once the utilities for A.Y. 2025-26 will be out, we will be having more clarity on the same.

  2. These will be applicable as per the provisions in force during the financial year in which the tax will be paid - in this case, FY 2025-26.

  3. To close the Capital Gains Account after paying tax on the unutilized amount, you will require the AO approval. This typically involves submission of supporting documents such as your income tax return and a formal request for closure.

Hope this helps!

3

Thanks for the detailed reply, @Ayushi_Joshi

  • On the taxation rate - I have conflicting views. A higher % of CAs mentioned that the taxation rate will be applicable for the year in which CGAS expires which is FY 25-26 as the deemed income is considered in that year as per the definition of CGAS expiry scenario. Hence, for me the challenge is between 12.5% vs 20%.
  • Also, a few said that it is mentioned in the Income Tax Act that it will be charged under section - 45 in case CGAS expires.(Can you check that)?
  • Whereas others mentioned that they are not sure whether section - 112 would be applicable in this scenario or not to determine the rate.

I’m not CA, but these conflicting opinions are coming in. Do you see any interpretation issues with respect to the scenario of CGAS expiry? Also, do you know any past scenarios where LTCG was changed, resulting in a revised rate of taxation on CGAS expiry?

Apologies for asking too many questions, but I have always found Quicko to be a much more reliable platform for taxation queries.

Thanks again !!

4

Hello Team @Ayushi_Joshi @TeamQuicko - Looking for the response to the above mentioned query. Thanks

5

Hey @capitalgain

As per Section 54F, any unutilised amount will be treated as income in the previous year in which the three-year period from the date of transfer of the original asset ends. Since your three-year period ends on 1st December 2025, it will be taxable in F.Y. 2025-26. With regards to the rate, we suggest you to wait until the relevant utilities are released. Once they are available, we will have better clarity on the same.

Hope this helps!

6

Sure, appreciate quick response. Is there anyway i can track on the updates of utilities? I’ll bookmark that link if you can share. Thanks.

7

Hey @capitalgain

Income Tax Department will release its utility here for F.Y. 24-25 shortly.