- ITAT Ahmedabad allows Section 54F exemption without the need to deposit money in the Capital Gains Account Scheme (CGAS).
- Exemption is given if capital gains are used to buy or build a new house within the set time limits.
- Experts still suggest depositing any unused gains in CGAS to avoid tax issues later, despite this relief.
In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Ahmedabad has clarified that taxpayers will not lose the benefit of Section 54F exemption on long-term capital gains if they fail to deposit the unused amount in the Capital Gains Account Scheme (CGAS). The tribunal stated that the exemption remains valid as long as the taxpayer invests the gains in purchasing or constructing a new residential property within the prescribed time limit.
Section 54F gives you tax relief when you sell a long-term asset (other than a house) and invest the capital gains in a new residential house. You have two years to buy or three years to build the new house. If you haven’t used all the capital gains before filing your income tax return, you must deposit the remaining amount in a notified Capital Gains Account Scheme (CGAS). This scheme keeps your money safe until you complete the house purchase or construction.
ITAT Ahmedabad’s Important Ruling on Section 54F Exemption
Recently, the Income Tax Appellate Tribunal (ITAT) in Ahmedabad ruled that you can’t be denied exemption under Section 54F just because you didn’t deposit unused capital gains in CGAS. The main condition is that the capital gains must be used to buy or build the new house within the set time limits.
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Case Study: Alpesh Navinbhai Barot’s Tax Exemption Issue
This ruling came from the case of Alpesh Navinbhai Barot, who sold non-agricultural land and earned long-term capital gains. He claimed exemption under Section 54F by investing the gains in building a new house. But the tax officer rejected his claim because he hadn’t deposited the unused gains into CGAS before filing his return for AY 2015-16.
The ITAT disagreed with the tax officer, saying that even if no deposit was made in CGAS, the money spent on house construction before the return filing deadline should be allowed as a deduction. The tribunal also referred to a similar ruling by the Bengaluru ITAT bench supporting this view.
What This Means for Homebuyers and Taxpayers
This ruling offers relief to taxpayers who may have missed the step of depositing unused capital gains in CGAS but have followed the main rule of reinvesting the gains in a new house within the time allowed. However, tax experts advise being careful. Until all tax authorities agree on this, it’s safer to deposit any unused capital gains in CGAS before filing your return to avoid possible problems.
| Aspect | Details |
|---|---|
| Section | Section 54F of Income Tax Act, 1961 |
| Capital Gains Account Scheme | Notified scheme to deposit unused capital gains |
| Time limit for purchase | 2 years from date of sale |
| Time limit for construction | 3 years from date of sale |
| ITAT ruling date | August 2025 |
| Official ITAT website | https://itat.gov.in/ |
This ruling is a helpful step for homebuyers and taxpayers, reducing procedural hassles while keeping the law’s purpose intact. If you want to claim exemption under Section 54F, remember the deadlines and think about depositing unused gains in CGAS as a safety measure. For more information, visit the official ITAT website.