When considering the sale of significant investments like shares and securities, vacant plots, and house properties, the timing of the transaction can have substantial financial implications. From the point of view of tax planning, the end of the fiscal year is the most important time to plan the sale of assets.
Many equity investors conduct tax harvesting of both gains and losses in March before the fiscal year ends. One other, though less famous, tax planning exercise to carry out in March is planning property sales.
Those due to sell property in March should consider deferring the sale to April to optimize advance tax payments and reinvestment planning that helps avoid paying capital gains tax. Below is an analysis of the benefits of extending the sale from March 2025 to April 2025, with examples and calculations presented in tables for clarity.
Advance tax payment flexibility
Fifteen March is the final due date of advance tax payment in the fiscal year. Selling a property or any other capital assets in March 2025 would entail the payment of the entire advance tax on the capital gains before the fiscal year ends. If the sale is done before 15 March, the entire advance tax on the capital gains must be paid. When the sale is between 16 March and 31 March, the advance tax liability must be settled by 31 March. Failing to pay the entire advance tax liability before 31 March attracts monthly interest of 1% on the unpaid amount.
In contrast, selling property in April allows the capital gains to fall under the fiscal year 2025-26, enabling advance tax payments to be distributed in installments. People are required to pay advance tax in four quarterly payments: 15 June, 15 September, 15 December, and 15 March.
For instance, say you have ₹50 lakh long-term capital gains tax liability. If you sell the property in March, the entire ₹50 lakh is to be paid by 31 March. However, selling in April would mean you get the option to pay 15%, 45% (cumulative), 75% (cumulative) and 100% of the amount across four quarters.
This staggered payment schedule reduces the immediate financial burden and improves cash-flow management.
Extended time for CGAS deposits
Taxpayers can reinvest capital gains in a new residential property to claim exemption on the capital gains tax under Section 54 or 54F. Sections 54 and 54F have timelines of when reinvestment is allowed to get tax exemption on the gains, but the taxpayer can’t let the gains sit idle in the bank account.
If the property where gains are to be reinvested is not yet shortlisted, taxpayers must deposit unutilized amounts in the Capital Gains Account Scheme (CGAS) in the interim. However, this must be done before filing their income tax return (ITR) because if the gains lie in the bank account, the taxpayer will need to pay tax on them when filing ITR.
However, if the money is deposited in the CGAS, they can declare that in the ITR to get an exemption from paying tax.
Selling the property in March 2025 would require a CGAS deposit by 31 July 2025, the due date for filing the ITR. On the other hand, selling in April extends this deadline to 31 July 2026, as the ITR for 2025-26 can be filed until this date. This provides an additional one year to plan the reinvestment better while not going through the process of depositing the gains.
This strategy not only improves cash flow but also provides flexibility for reinvestment decisions.
Deepak Kakkar is a Delhi-based chartered accountant and senior manager at Jaikumar Tejwani & Co. LLP.
