Maximize tax savings
up to ₹46,800 easily
0% commission • Earn upto 1.5% extra returns
Thank you for your response
Our representative will get in touch with you shortly.
Thank you for your response
The government, in order to encourage reinvestment of the capital gains made on the sale of capital assets by the seller, has provided with relief from capital gains tax if such capital gain is re-invested in certain specified assets within a specified time limit under section 54 to 54GB.
There may be instances where the taxpayer is unable to re-invest the capital gains in modes as specified in the Act before the filing of return of income or before the expiry of time to invest the gains. To address this, in order to enable the taxpayer to park his funds till they are invested for the prescribed purpose, the concept of Capital Gains Account Scheme(CGAS) was introduced.
Capital Gains Account Scheme was introduced in 1988 by the Central Government.
As mentioned above, the time limit available to the depositor for re-investment and avail the exemption, in many cases is longer than the due date to file the return of income. In such cases, the taxpayer is given an option of depositing such underutilised capital gains in ‘Capital Gains Account’ introduced under Capital Gains Account Scheme.
Any capital gain invested in Capital Gains Account Scheme will be eligible for capital gain exemption as it would in case of re-investment.
Category of the taxpayer with capital gains who is eligible to invest in CGAS from Section 54 to 54F of the Income-tax Act, 1961 “Act”, is provided below:
|Section Number||Capital gains made on||Category of person|
|54||Sale of residential house||Individual or HUF|
|54B||Sale of land used for agricultural purpose||Individual or HUF|
|54D||Compulsory acquisition of land and building||Any taxpayer|
|54E||Sale of any long term capital asset||Any taxpayer|
|54EC||Sale of long term capital asset being land or building or both||Any taxpayer|
|54F||Sale of any long term capital asset not being residential property||Individual or HUF|
|54G||Transfer of asset (machinery, plant or building, land or right in land or building) in case of shifting of industrial undertaking from urban area||Any taxpayer|
|54GA||Transfer of asset/s (machinery, plant or building, land or right in land or building) in case of shifting of industrial undertaking from urban area to Special Economic Zone||Any taxpayer|
|54GB||Transfer of residential property||Any taxpayer|
A taxpayer who is unable to re-invest capital gains in the specified investment before furnishing the return of income and specified time limit for the investment has not expired, is required to deposit such unutilised capital gain in the capital gains account before furnishing return of income but not beyond the due date for furnishing return of income.
Capital gains account can be opened in any of the authorised bank branches excluding rural branches of such authorised banks.
Procedure to open capital gains account and manner of deposit:
Two types of deposits can be made under capital gains account scheme which is explained below:
The interest rate for both deposits is fixed by RBI from time to time. The depositor may choose the appropriate type of deposit keeping in mind his plans for specified investment, requirement of fund, rate of interest etc.
As mentioned there are no restrictions on withdrawal from Type A – savings account. While premature withdrawal from Type B account is allowed, it is allowed only after transferring the amount to Type A account and there may also be consequential penalty.
Any amount withdrawn is required to be utilised for specified investment within 60 days of withdrawal and any unutilised amount may be re-deposited to Type A account immediately.
Form C shall be submitted for withdrawal from an account for the first time and Form D for subsequent withdrawal providing details of the manner of utilisation of money withdrawn earlier. Hence, no chequebook or debit card is issued to the depositor.