CBDT extends compliance deadline for capital gains tax waiver on residential properties

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In a move that will provide relief to a number of taxpayers, the income tax department has extended the time limit for a number of compliances related to long-term capital gains tax exemption, till March 31, 2023.

The Central Board of Direct Taxes (CBDT) had, in June 2021, provided a relaxation for certain compliances to be made by taxpayers including investment, deposit, payment, acquisition, purchase and construction for the purpose of claiming any exemption under the provisions contained in Section 54 to 54GB of the Income-tax Act, 1961.

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According to the circular, individuals who had to save on long term capital gains from specified transactions by investing in another property or bonds between April 1, 2021 and September 29, 2021 could do so by September 30, 2021.

The CBDT has now decided to extend this deadline to March 31, 2023 “in view of the representations received and on further consideration of the then-prevailing Covid-19 pandemic and resultant restrictions imposed, causing genuine hardship faced by taxpayers in making the aforementioned compliances”. This is the second such extension provided under the provision by the CBDT.

Experts said this will give taxpayers more time to decide and make investments to avail benefits and save on capital gains tax.

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Neeraj Agarwala, Partner, Nangia Andersen said the relief will provide an opportunity to taxpayers to evaluate the investment in the capital gains amount in opportunities, which are now available and were not there or were limited one year ago due to the pandemic.

Section 54 of the Income Tax Act relates to capital gains tax and availing exemption from sale of residential property by either purchasing another residential property or investing in specified bonds and instruments. The exemption is available to individuals and HUFs. The residential property has to be purchased either one year prior to the sale of the previous property or within 2 years after the sale. In case of construction of a new property, there is a three year window to avail the exemption.