Refund.

The amount in CGAS is available for construction of your residential house. If the amount utilised is less than the balance available in CGAS, then the shortfall will be assessed as LTCG in the year 3 from the date of the transfer of your orginal asset. Thus if the asset was sold on, say, 20th May 2021 and the proceeds were invested in CGAS, the construction of the new house should have been completed within 3 years from the date of sale, i.e., by 20th May 2024. Now the following situtations may be arising in the usage of funds:

1) The entire amount was used in the construction of the house but the amount withdrawn from the CGAS was less than the amount used for the construction, meaning that the funds were used from own sources without using the funds from CGAS. In such case, you can apply to the Income Tax Department for withdrawl of the funds from CGAS.

2) The entire amount used for the construction is less than the amount claimed u/s 54F. In such case the shortfall, will be taxed in the year financial year, 2024-25, as the construction should have been completed by 20th May 2024. Now if the shortfall is, say, Rs 10 L and the shortfall in the utilisation of the balance in CGAS, is, say, Rs. 2  only, then you'll be paying LTCG on Rs. 10 L and the amount will be allowed to be withdrawn after the payment of taxes. 

Trust this clarifies your query. 

Yes, Section 54F allows exemption on the total amount invested, not just CGAS funds. Since you used both CGAS and non-CGAS funds within the 3-year period, you should be eligible for a higher exemption.

Steps to Improve Refund Chances:

1. 
   File a Revised Return (if within time) under Section 139(5).
2. 
   Apply for Rectification under Section 154 if return is processed.
3. 
   Submit Proofs – Sale deed, construction invoices, bank statements, and architect certificate.
4. 
   Respond to IT Queries with justification.

Your case is strong, but scrutiny is possible. Follow the process properly for a good chance of refund.

For detailed, personalized advice, consider a phone consultancy. Hope you find the information helpful. You are free to contact me for further discussion. If you could spare two minutes of your time to write a review, it would be greatly appreciated and bring immense happiness to read it. Thank you. Shubham Goyal.

Investment u/s 54F is for the entire amount of sale proceeds in the new residential house. If entire sale proceeds are not used for the construction, then such amount representing the shortfall should be deposited in CGAS on or before the due date for the filing of your IT Return, which is 31st July 2024 in your case. It appears that you did deposit in the CGAS and claimed exemption u/s 54F. As you have already used the balance in CGAS, there is no issue of refund of the amount in CGAS.

Now apart from the amount in CGAS, you also invested additional amount in the construction of new house. Hence, the exemption claimed should have been the full amount of LTCG. However, it appears that you claimed exemption only in respect of the amount deposited in CGAS, which is only a part of the sale proceeds. Thus your claim for exemption is less than the amount you could have actually claimed. 

You are allowed to file a revised return u/s 139(5) at any time before 3 months prior to the end of the assessment year, i.e., on or before 31st December 2024, assuming that your return was still not processed by that time. You cannot file revised return now. 

You can file a request for rectification u/s 154 on the ground that it is a mistake apparent from record. But this may not be the right approach as the department can reject the application on the ground that it was not a mistake apparent from record, as you did not even claim. 

In my view, you can file an application u/s 264 before the Principal Chief Commissioner of Income Tax Act to allow exemption u/s 54F in full as the claim was made by erroneously only for the actual amount depoisted in CGAS and not for the full amount of sale proceeds, which were actually utilised by way of construction of house and by way of deposit in CGAS to the extent not utilised before the due date for the filing of return, i.e., 31st July 2024.  

My advise will hold good only if you deposited part of the sale proceeds in CGAS and did not claim exemption for the full amount of sale proceeds invested in the new construction of new residential house out of funds outside CGAS also. I' am also assuming that your assessment is now processed. If its not processed still, try to file a revised return on or before 31st March 2025, but I 'm not sure whether it can be done after 31st December 2024. 

- To avail benefit u/s 54F, taxpayer has to invest the net sale consideration for the purchase/construction of new asset within the time limit of 2/3 years

- Assuming you have deposited the net sale consideration in the CGAS. As the cost of new asset is more than the amount of net sale consideration and the entire net sale consideration has been fully utilised for the construction of new asset therefore the entire capital gain amount is exempt. You can utilize non-CGAS funds for the construction of the new asset but for the purpose of exemption u/s 54F, only CGAS amount will be compared with the cost of new asset. If any TDS or advance tax was paid on the sale of original asset then you had already claimed such prepaid taxes while filing ITR of A.Y. 2024-25.

- From A.Y. 2024-25, cost of new asset is capped to Rs.10cr

- Apply for closure of CGAS

For detailed discussion, you may opt for phone consultation

​Under Section 54F of the Income Tax Act, to claim a full exemption from long-term capital gains (LTCG), the taxpayer must reinvest the entire net sale consideration (i.e., the total sale proceeds, not just the capital gains) into a new residential property. If only a portion of the sale proceeds is reinvested, the exemption is granted proportionately.

Key Points:

• Full Exemption: Requires reinvestment of the entire net sale consideration into a new residential property.​

• Partial Reinvestment: If less than the total sale proceeds are reinvested, the exemption is calculated proportionately.​

   

Your Situation:

• Original Asset Sale: April 2023.​

• Property Purchase: November 2024.​

• Expected Construction Completion: November 2025.

• Funds Utilized: Both CGAS and additional non-CGAS funds, exceeding the initial deposit by approximately 40%.​

Claiming Additional Exemption:

Since you've reinvested more than the net sale consideration into the new residential property within the stipulated time frame, you are eligible to claim a full exemption under Section 54F. The exemption is not limited to the amount deposited in the CGAS account but applies to the total amount reinvested, irrespective of the source of funds.​

Steps to Claim the Additional Exemption:

1. Maintain Detailed Records:

   • 
     Keep all documentation related to the purchase and construction of the new property, including agreements, invoices, and payment proofs.​

2. File a Revised Return:

   • If your original Income Tax Return (ITR) claimed an exemption only for the CGAS amount, you should file a revised return to reflect the total amount reinvested.​

   • Ensure that the revised return is filed within the permissible time limits as specified under the Income Tax Act.

Thanks
Damini