Withdrawals of fund from CGAS is better than using own funds for purchase / construction of the house property




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 Withdrawals of fund from CGAS is better than using own funds for purchase / construction of the house property

 

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 summarized hereunder:

  1. Withdrawals from Capital Gains Account Scheme (CGAS):
  2. a)Often, Banks don’t issue any cheque book for the capital gains account and so the amount is to be withdrawn without using a cheque.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.
  3. b)The amount deposited in the CGAS can be withdrawn by making an application in Form C. The amount so withdrawn has to be utilised within 60 days from the date of such withdrawalsand only for the purpose of such withdrawals.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.
  4. 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.
  5. 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.

 

  1. 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.

 

  1. 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.
  2. It is always advisable for the taxpayers to use the Fund by withdrawing the amount from the CGAS Account as no permission is required from the income tax authorities for normal withdrawals. The permission is required only for the closure of the CGAS.

 

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