Income Tax

Clarification on extension of due dates of Capital Gains

extension of due dates of capital gains to 30.09.2020

Clarification on extension of due dates of Capital Gains to 30.09.2020

Government has already given various relaxation to the taxpayers vide Taxation & other Laws (Relaxation of certain provisions) Ordinance 2020 issued in the month of March – 2020. Thereafter, the dates of relief is further extended vide Notification No. 35/2020 Dated 24.06.2020. As a result of both the ordinance, various due dates will be falling due from 31st July 2020 to 31st March 2021.

It may be noted that the due date for claiming capital gain exemption from section 54 to section 54GB has been extended to 30.09.2020. [Ordinance issued on 24th June 2020 appears to have wrongly mentioned the availability of exemption only “for section 54 or 54GB”. Reading in alignment with the press release & earlier ordinance, exemption appears to be for all from (section 54 to Section 54GB) and not (54 or 54GB alone)].

We have received a few queries on this extension and have listed the main two issues with their possible opinions as below:-

Query no 1:

Whether the persons who have earned LTCG in the FY 2019-20 need to invest the amount in Capital Gain Deposit Account Scheme (CGDAS) before 30th September 2020 for claiming LTCG Exemption?

Opinion:

Absolutely not.

1.   Investment in CGDAS is linked with the due date of filing income tax return ONLY.

2.   Since the due date of filing income tax return is 30th Novebmer 2020 for the FY 2019-20, the due date for deposit in CGDAS for subsequent exemption claim would be 30th November only.

3.   The date of 30th September 2020 would be only for those taxpayers who have earned LTCG in earlier year and the period of capital gain exemption (i.e., 2 years or 3 years or 6 months etc ) is expiring in between 20th March 2020 to 29th September 2020).

4.   In short, the persons who have earned LTCG in the FY 2019-20 will not at all be impacted by the date extension to 30th September 2020 except those who have sold the Long Term Capital Assets after 20th September 2019 and wish to claim LTCG exemption u/s 54EC by investing the amount in specified bonds.

5.   Persons who have earned LTCG in FY 2019-20 will not at all be affected by the date of 30.09.2020. It is only for those who have earned LTCG in earlier years.

Query no 2:

Whether it will impact the taxpayers in whose case the period of 3 years will be expiring in the FY 2019-20?

Opinion:

1.   All those taxpayers who are not able to invest the amount of LTCG in a stipulated way for capital gain exemption before the due date of filing income tax returns are required to segregate the amount in CGDAS.

2.   Amount deposited in CGDAS is then required to be used for the intended purpose of purchase/ construction etc within a period of 2 years or 3 years.

3.   All those taxpayers who have earned capital gain in earlier years i.e., prior to FY 2019-20, & in whose case the period of utilization is expiring from 20th March 2020 to 31st March 2020 would be required to utilize the amount till 30th September 2020. If such taxpayers fail to utilize the amount for intended purpose till 30.09.2020 then the amount would be taxable as income for the FY 2019-20 (& not FY 2018-19 for which the due date of filing belated return is 31.07.2020).

4.   It may be noted that the due date for filing income tax return for FY 2019-20 is already extended till 30.11.2020 i.e., date after the period of utilization is over on 30.09.2020. To this extend, there is no inconsistency in the date extension.