Tax on withdrawal from capital gains account.

If you don’t use the funds for purchasing the property and instead use them for other purposes, the unutilized amount in the Capital Gains Account Scheme (CGAS) will be taxed as LTCG in the financial year 2024-25 (AY 2025-26), as per Section 54B.

Key Points:

1. 
   No Additional Penalty – Only LTCG tax at 20% + surcharge & cess applies.
2. 
   Tax Payment Deadline – LTCG should be paid before 15th March 2025 as advance tax, else interest under Sections 234B & 234C may apply.
3. 
   Tax Payment in Next FY? – No, it must be paid in FY 2024-25 (before 31st March 2025).
4. 
   Re-depositing in CGAS? – Not allowed. Once withdrawn, the amount cannot be re-deposited to claim exemption again.

Best Option:

• If you won’t use the funds for a new land purchase, pay the LTCG tax before March 15, 2025, to avoid interest penalties.

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.

Normally withdrawals from Captial Gains Account (CGA) are allowed only for the purpose of purchase or construction of a new land. I wonder how the amount was allowed to be withdrawn and deposited in the joint account, without any Sale Deed or Agreement for Sale. 

The LTCG is related to the assessment year 2024-25. Now when you decide not to buy the land, you have the following options:

1) File a revised return but the last date is 31st December 2024, assuming that your return was not processed by that time. If the return is still not processed, try filing a revised return.

2) File an Updated Return in Form  U for the assessment year 2024-25 offering LTCG after 31st March 2025 but before 31st March 2025.  The you will then be paying tax as applicable along with additional tax of 25%. 

As there is still time, I suggest using the money for the intended purchase of the land instead of cancelling the sale transaction. 

1. Withdrawal and Non-Utilization of CGAS Funds:

• Initial Deposit: You deposited the capital gains from the sale of agricultural land into a CGAS account to avail tax exemption, with the intent to reinvest in another property.​

• Withdrawal: In February 2025, you withdrew the entire principal amount to purchase land from your brother; however, the sale deed has not been executed, and the funds currently reside in your joint account.​

• Change of Plans: If you decide not to proceed with the land purchase and instead use the funds for other purposes, the unutilized amount becomes taxable.
  

2. Tax Implications:

• Capital Gains Tax (CGT): The unutilized capital gains will be subject to Long-Term Capital Gains Tax (LTCG) at a rate of 20%. This tax liability arises in the financial year when the specified period for reinvestment expires.​

• No Additional Penalties: There are no specific penalties for not utilizing the CGAS funds as intended, beyond the obligation to pay the applicable LTCG tax.​

3. Tax Payment Timeline:

• Advance Tax: If the tax liability exceeds ₹10,000, you're required to pay advance tax in instalments throughout the financial year. Failure to do so may result in interest charges under Sections 234B and 234C of the Income Tax Act.​

• Self-Assessment Tax: Any remaining tax liability should be settled before filing your Income Tax Return (ITR) for the relevant assessment year.
  

Thanks
Damini