Your Taxes

I am a senior citizen and have income from pension, rent from one property, interest income and exempt income of long-term capital gains from stocks on which STT has been paid. Which ITR should I use: ITR 1 or ITR 2A?

KK Aggarwal

 As per the instructions to Form ITR 1 (SAHAJ) pertaining to financial year 2014-15, this form can be used by any individual who receives salary, has income from one house property and other sources (excluding income from race horses and winning from lottery). Since you have earned exempt income under the head “capital gains”, you could consider using Form ITR 2A which specifically provides for details relating to exempt income from long-term capital gains (from transactions on which STT is paid).

In January 2014, I sold my house and invested the sale proceeds in capital gains a/c as fixed deposits. I split the amount into four FDs of different denominations to enable me to withdraw as and when required. I wanted to purchase an apartment out of the sale proceeds to get capital gain tax exemption. After about six months I booked an apartment and paid some instalments as per the terms and conditions. Now the builder wants to register the apartment in two parts as 50 per cent in sale deed and the remaining amount as construction agreement by paying stamp duty for both the deeds. Sale deed only will be registered. As I have to claim the capital gain exemption for the entire amount which I have invested, are the sale deed and construction agreement valid? Or should I get the sale deed registered for the entire amount of the apartment to avail of the exemption? In such a case, do I have to pay more stamp duty and registration charges? I am a senior citizen.

Radha Kumar

Section 54(2) of the Income Tax Act, 1961 (‘the Act’) mentions that, exemption on capital gains will be provided on “utilisation” of the amount in the capital gains account scheme (CGAS) for the purpose of purchase/construction of a new house property. There are no particular guidelines or specific prohibition on the method of utilisation of the same. The only criteria which needs to be fulfilled to claim the relevant exemption is that such deposit has to be made before the date of furnishing the return of income under Section 139 (1) of the Act or the due date of filing the return of income (which was July 31, 2014 for the tax year 2013-14) whichever is earlier.

 Given the above, the registration of the sale deed in two parts will not impact the claim of exemption. You could claim the exemption under the provisions of the Act, provided the capital gains from the sale of property is deposited in CGAS within the aforementioned due date and the same is ultimately utilised for the purchase/construction of a house property within two years from the date of sale.

The writer is Partner, Deloitte, Haskins and Sells, LLP. Send your queries to taxtalk@thehindu.co.in