I had deposited a sum of ₹15 lakh in capital gains FD. My interest on FD is not credited to my SB account but added to my FD. My capital gains from property sale were only ₹15 lakh. Can I withdraw the interest amount for my personal expenses?

Kamal Poddar

Investment in Capital Gains Deposit entitles the individual for tax exemption. Withdrawal from such deposit is permitted only for specified purposes, that is for making eligible investments (purchase of house property within two years or construction of house property within three years).

Any premature withdrawal or withdrawal for any purpose other than those specified would revoke the tax exemption and the individual is required to pay capital gains tax in the year of withdrawal.

Hence, in your case, withdrawal of interest portion for personal expenses would be considered premature withdrawal, leading to taxing the capital gains in the year of withdrawal.