Capital Gains Accounts Scheme
With the introduction of Capital Gains Accounts Scheme 1988, assesses can avail the benefit of exemptions from Capital Gains only if the amount of Capital Gain or net consideration is deposited with specified bank authorized by the central government in accordance with the Capital Gains Accounts Scheme on or before their (taxpayers) due date of filing return of income prescribed under section 139 of the Income-Tax Act, 1961.
Account Types under the Capital Gains Accounts Scheme
- Account Type – A: This account will be in the form of Saving Fund Account and the depositor will be provided with a Pass Book, giving the details of receipt, payments and interest paid on deposit as well.
- Account Type – B: This account will be in the form of Term Deposit Account and depositor will be issued a deposit receipt. Term Deposit Account can be both Cumulative as well as Non-cumulative on a quarterly basis.
Who can take the advantages of the Capital Gains Accounts Scheme?
The advantage of the Capital Gains Accounts Scheme can be availed by individuals and Hindu Undivided Family (HUF). In short, It applies to all assesses who are eligible for exemption under section 54, 54B, 54D, 54F or 54G of the Income-tax Act, 1961.
Where and how can I open the Capital Gains Accounts Scheme?
This account can be opened in State bank India or any bank which is authorized by the Central Government for the scheme. To open CGAS account you will have to fill up and submit a form (Form A) and deposit the money in the account. If the money deposited in the form of Cheque or Draft, the effective date for the purpose of provision of exemption will be the date of cheque/draft deposited date subject to realization.
Ways to deposit money in the CGAS Account?
Deposits in the accounts can be made in cash, by crossed cheque or by draft in lump-sum or in instalments at any time on or before the due date of the filing of Income Tax Return.
What is the procedure to withdraw money from the Capital Gains Accounts Scheme?
For withdrawals of funds from CGAS under Account Type – A can be made from time to time by the depositor, subject to specified terms and provisions of the Scheme by submitting the requisite form where withdrawals under Account Type – B can be made after the expiry of the deposit period only.
Form C should be filled up and submitted to the bank for the initial withdrawal from Account Type – A. For subsequent withdrawal from Account Type – A, form D should be used. Since Account Type – B is a term deposit account, for withdrawal, it will first have to convert into Account Type – A, by filling Form B and then follow the method of withdrawal as Account Type – A.
When to open the Capital Gains Accounts Scheme?
You can open this account any time before the last date for filing returns of a particular financial year after the capital gains earned. For e.g., If the sale of an asset has taken place in August 2012 of ₹ 80 lacs and it arises the capital gain of ₹ 20 lacs, if you don’t utilize this capital gain to buy another property, you can open the CGAS before 31st July 2013 and park the gain amount for exemption.
Few Important Points to Remember:
- Interest earned in this account is taxable.
- Any unutilized amount after withdrawal has to deposit back.
- The amount can be easily transferable from Account Type – A to Account Type – B and vice-versa of the same Bank.
- If the amount is not utilized wholly or partly for the desired purpose, within the specified period, the unutilized amount shall be treated as capital gains of the year during which the specified period expires
- A depositor having Account-A, at any time after making an initial deposit, can apply on Form ‘C’ with Pass Book for the withdrawal of the amount from the balance in Account-A, subject to other provisions of the Scheme.
- Where the amount sought to be withdrawn exceeds ₹ 25,000, the bank shall make payment by way of a crossed demand draft drawn in favour of the person to whom the depositor intends to make the payment. The amount withdrawn shall be utilized within 60 days. The unutilized portion, if any, shall be redeposited into CGAS.
- A depositor intending to make a withdrawal from his Account-B shall first get his account transferred in his account-A and then may withdraw the amount in the same manner as stated above. If it is a premature transfer, the interest will be adjusted as explained above.
- The unutilized amount is not taxable in the hands of legal heirs as the unutilized portion of the deposit does not partake the character of income in their hands but is only a part of the estate devolving upon them.
Procedure to Close Capital Gains Accounts Scheme:
The depositor himself at any time with the approval from his assessing officer can close the account by submitting requisite Form G to the bank.
On the death of the depositor, the nominee of the account can also close the account with the approval from his assessing officer can close the account by submitting the requisite Form H to the bank.
In absence of nominee, the legal heir of the deceased depositor with the approval from his assessing officer can close the account by submitting requisite Form H to the bank. The disclaimer of other legal heir is also required to be submitted to the bank.
In the case, where there is more than one legal heir, the approval of assessing officer will be obtained only providing probate of a will, succession certificate or a letter of administration to the estate of the deceased depositor.
What Are The Different Type Of Forms Used To Operate Capital Gain Account Scheme?
- Form C:- Whenever the account holder needs to withdraw money for the purpose of making payment for the purchase or construction of a residential property, he can apply using form C.
- Form D:- After initial or first withdrawal, the taxpayer needs to apply for withdrawal using form D in duplicate.
- Form E:- The scheme further provides that the amount which has been withdrawn should be utilized for purchase or construction of the property within 60 days from the date of such withdrawal. The facility of nomination is also available to the deposit holder by filling up Form No E.
- Form G:- Account holder can apply for the closure of capital gain account scheme using Form G.
- Form H:- Nominee or legal heir need to take approval from the assessing officer in Form H who has jurisdiction over deceased depositor and submit to the bank.
Where To Open A Capital Gain Account Scheme – Saving/Fixed?
The account can be opened with any branch (excepting a rural branch) of the designated nationalized banks including:-
- State Bank of India
- Oriental Bank of Commerce
- UCO Bank
- Union Bank of India (UBI),
- Punjab National Bank,
- Vijaya Bank
- State Bank of Bikaner & Jaipur
- State Bank of Hyderabad
- State Bank of Indore
- State Bank of Mysore
- State Bank of Patiala
- State Bank of Saurashtra
- State Bank of Travancore
- Central Bank of India
- Bank of India
- Bank of Baroda
- Canara Bank
- United Bank of India
- Dena Bank
- Syndicate Bank
- Allahabad Bank
- Indian Bank
- Bank of Maharashtra
- Indian Overseas Bank
- Andhra Bank
- Corporation Bank
- New Bank of India
- Punjab & Sind Bank.