Capital Gains Reinvestment

Dear Krishnan, Two types of accounts can be opened—a CGAS savings account (Account A) or CGAS term deposit (Account B). Period of deposit is 3 years from date of transfer of original asset.

Funds can be withdrawn from CGAS account for purchase or construction of house.

I believe that you can use the Account monies to buy a Flat or house (old or new). Kindly check with your banker too.  

Thank you for your comments. I have a few queries 1) Should I only buy a plot and construct or can I also buy an old residential house within 3 years, given that I am now in 34th month out of the 36 month exemption time limit to reinvest 2) What happens if I do not reinvest after / within 36 months, but the capital gains is reinvested in a Capital Gains account scheme in an public sector bank. Will I have to pay taxes along with penalty, what will be the penalty. Or Because I have kept / parked the money in an Capital Gains account scheme for 3 years and I am getting lesser interest at 4% than the 6% in NHAI / REC bonds, Can I take out the money and use it after paying taxes on interest Your advice will be appreciated Thanks & regards P S Krishnan 

Dear Krishnan, 1 - I got it checked that to buy a new/old constructed property, the time-limit is 2 years, and for the construction of house it is 3 years. I stand corrected. If the amount deposited is not utilized fully for purchase or construction of new asset within the stipulated period, then the amount not so utilized will be treated as capital gain of the year in which the period of three years from the date of sale of the original house expires. 

Dear Sreekanth, Thank you for responding to my query. My specific query is can I also buy an old residential house within 3 years (without buying  aplot and constructing a house), given that I am now in 34th month out of the 36 month exemption time limit to reinvest

Dear Krishnan, In my previous comment I did mention that the property (already constructed) new or old , the time-limit is 2 years. You may also kindly check with a CA.

Thank you for your comments. This has helped me decide the next course of action. I have decided not to buy a property and construct, instead i will pay tax on the capital gains I had sold a property in Feb 2014, and I invested the capital gains in an capital gains account on 31 July 2014 with the objective of buying a housing plot and constructing a house. But on account of change in property registration policy of Tamil Nadu, I was not able to purchase / register a plot. My 3 year reinvestment period ends in Feb 2017 and I have now decided not to reinvest. The queries I have are 1. If I do not invest the capital gains that is parked in the capital gains account within 3 years, do I have to only pay 20% Long term capital gains tax on the gains, or is interest and penalty on the capital gains for 3 years also applicable (I am aware that I will have to pay capital gains on the interest accumulated in the capital gains account). This query is if there will be interest and penalty on the capital gains 2. Assuming that there is no interest / penalty on the capital gains. Will this capital gains be treated as income for the financial year. If yes which year should I declare the income. I sold the property in Feb 2014, and the 3 year period end in Feb 2017 (FY 2016-2017); and I invested the capital gains in an capital gains accounts scheme in July 2014 and the 3 year period end in July 2017 (in FY 2017-2018). Should this be declared as income in FY 2016-2017 (3 years from sale of old property) or in FY 2017-2018 (3 years from investment in the capital gains account scheme) Your views will be very much appreciated regards P S Krishnan

Dear Krishnan Ji, If the amount deposited is not utilised fully for purchase or construction of new asset within the stipulated period, then the amount not so utilised will be treated as capital gain of the year in which the period of three years from the date of sale of the original house expires. The capital gains here is LTCG. So, one needs to pay tax on LTCG (in your case its in FY 2016-17 or AY 2017-18).