Withdrawals & Closure of the Capital Gain Account Scheme (CGAS)

 

Query 1]

I have opened capital gain A/C in B.O.B, Sadar Branch, Nagpur.  I also submitted an I.T return on 28.7.2022. However, I have not operated the said account till date as my construction work is in the last stage. Now, I want to close the said account. Please advise me of the procedure and consequences, if any. [shelareshantaram1@gmail.com]

 

Opinion:

Taxpayers need to deposit the amount in the Capital Gain Account Scheme (CGAS) to save the Long Term Capital Gain (LTCG) Tax if the amount is not utilised for purchase/ construction of the house property before the due date of the income tax return. Many taxpayers are not aware of the procedure for Withdrawals & Closure of the Capital Gain Account. The same is summarised hereunder:

1.  Withdrawals from Capital Gains Account Scheme (CGAS):

a)  Often, Banks don’t issue any cheque book for the capital gains account and so the amount is to be withdrawn without using a cheque. However, it can be done by furnishing an application in Form C/ Form D.

b) The amount deposited in the CGAS can be withdrawn by making an application in Form C. The amount so withdrawn has to be utilised within 60 days from the date of such withdrawals and only for the purpose of such withdrawals. If the amount could not be utilised for any reason whatsoever then it should be re-deposited immediately.

c) For subsequent withdrawals, the application is required to be made in Form D along with the details of the manner/purpose for which the previous withdrawals have been utilised.

d) It may be noted that no approval from the Income Tax Department is required for withdrawing the amount from the CGAS. The approval from the Income Tax Office is only required at the time of closure of the account.

2.   Closure of the Capital Gains Account Scheme (CGAS):

a) To close the Capital Gains Account, an application in Form G is required to be made. Form G is a Certificate from the income tax department quantifying the amount of income-tax payable on the withdrawal for closure of account or allowing the banker to close the account without payment of income tax if the investment is otherwise done by the depositor for capital gain exemption.

b)  For this, the taxpayers need to approach the income tax officer and it has to be approved/signed by the income tax officer.

c)   In case of the death of the depositor, such application would be required to be made by the nominee/legal heirs in Form H.

In your specific case, it appears that you have already done the investment towards construction of the house property from your other resources without utilising the amount kept in CAS. You can approach your income tax officer with Form G along with documentary evidence of having done the investment in construction of the house property. After verification, the income tax officer will issue Form G for the closure of the CGAS.

 Query 2]

 

We have taken the housing loan in which my wife is Owner and I am the co-borrower also. EMI is being paid by me. Can I claim u/s 80C and U/s 24 deduction in my ITR filing? [shyamtiwari75956@gmail.com]

 

Opinion:

1. Taxpayers may note that ownership of the property is one of the pre-condition for availing housing loan benefit in the form of deduction u/s 24(b) towards interest payment & U/s 80C towards principal repayment.
2. It appears that you are not the owner of the house property but merely a co-applicant in the loan documents and repaying the entire the Loan /EMI. As a result, you will not be entitled for deduction U/s 24 or U/s 80C even if the repayment is done by you.

 

Query 3]

I have received outstanding demand for assessment year 2009-2010. The demand is mentioned as

a) Under section 143 (1)(a) and

b) Under section 143(3).

 

Why are two different sections & amounts mentioned in the demand? How for the same assessment year two demands can be raised? Kindly enlighten me. [scswami@gmail.com]

 

Opinion:

1. After the income tax return is filed, it is processed under section 143(1)(a). It is often referred to as the summary assessment without calling the assessee. Some prima facie mistakes in the income tax return like error in calculation of tax, interest, allowance or disallowance of loss, etc. is rectified while processing the return and the effect is given by way of demand/refund. All the returns filed by the taxpayers are invariably processed & the intimation U/s 143(1)(a) is issued. In your case, some demand might have been raised as a result of prima facie adjustment while processing the return earlier.
2. Section 143(3) refers to a detailed assessment (commonly called a scrutiny assessment). For assessment U/s 143(3), income tax authorities verify & confirm the correctness and genuineness of various claims, deductions, etc., made by the taxpayer in the return of income. It may happen that additional demand is raised as a result of some addition to the returned income or as a result of some disallowance while doing assessment U/s 143(3).
3. When the return is processed U/s 143(3), the issue of 143(1)(a) gets merged with it. The starting for processing return u/s 143(3) is the returned income. As a result, there should have been only one demand i.e., demand u/s 143(3) only in your case and no demand should have been there u/s 143(1)(a).
4. In your case, the dual demand prima facie appears to be erroneous. For the AY 2009-10, the demand is punched manually by your jurisdictional Assessing Officer. You can file a grievance against this at the portal and can also approach your jurisdictional assessing officer for its rectification. The process may be little time consuming and may involve regular communication for months.
5. Taxpayers should regularly keep on checking & responding appropriately over the “view Outstanding Demand” tab in the “Pending Action” option available after login in at www.incometax.gov.in.

 

Query 4]

If someone has a loss in business, and has to sell the property then can a capital gain from property sale be adjusted against loss? Whether to pay tax on capital gains due to property sale or there will be no tax due to loss? [harish*****la@gmail.com]

 

Opinion:

There are restrictions & limitations on adjustment of loss and profit while filing the income tax return. The loss under the head “Income from Capital Gain” is not allowed to be set off against other heads of income like income from business, house property, salary, etc.

 

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