All about CGAS 1988
Sale of Long term capital assets will either result in loss or gain for the owner of such capital assets, if the transaction results in loss then such loss can be adjusted in current or future years with gains under the head capital gain. Whereas if the resultant figures of such sale transaction is gain, then such gain is taxable at special rates prescribed under income tax act 1961
The Income Tax Act, however, allows you to save on taxes on these capital gains by making investments under Sections 54 to 54GB
A taxpayer who’s unable to re-invest capital gains in specified modes to claim exemption before due date of filing of Income Tax Return and the time period for making investments under the specified sections has not been expired, then the taxpayer can deposit the unutilized amount in Capital Gain Account Scheme 1988
The Capital Gain Account Scheme (CGAS) was introduced in 1988 by the central government. The CGAS Scheme has total 13 rules which deals with various issues involved in deposit of unutilized amount under capital gain account.
These rules are accessible at https://www.incometaxindia.gov.in
Now we’ll discuss the issues involved for a taxpayers who is willing to deposit the unutilized amount in bank account under CGAS 1988:
1. Category of Assessee who are eligible to deposit the amount under Capital Gain Account Scheme.
It applies to all assessees who are eligible for exemption under section 54, 54B, 54D, 54F [, 54G or 54GB] of the Income-tax Act, 1961.
2. Types of Deposit Account under this Scheme
There shall be two types deposits, namely;
– Deposit Account-A
– Deposit Account-B
Deposit Type A shall be in the Form of Savings Account, withdrawals under this type of account can be made from time to time by the depositor
Deposit Type B shall be in the Form of Term Deposit, with an option to the depositor to keep the deposit as cumulative or non cumulative basis. Withdrawal under this type can be made only after expiry of the specified period of time
3. Procedure for account opening under CGAS 1988
– Account can be opened by making an application in duplicate in Form A along with other required details or documents such as PAN, Address Proof, and Photograph Etc
– While applying for bank account opening, the depositor is required to indicate whether the account to be opened is Type A account or Type B account. Further in case the depositor is opting for Type B account, then he shall also mention whether the deposit is to be made on cumulative basis or on non cumulative basis
– The payment of deposit amount can be made in either in cash, or by cheque or demand draft
– Effective date of deposit, in order to claim the benefit of exemption shall be the date of deposit of cheque or draft at deposit office (subject to realization)
– In case the deposit is made under Type A account, then the bank will issue a pass book wherein all the details of deposit, withdrawal, interest due etc shall be recorded
– In case the deposit is made under Type B account, then the bank shall issue a deposit receipt wherein the principal amount, date of deposit etc shall be mentioned
4. Procedure for transfer and conversion of the account
– Depositor may apply to transfer his or her account from one branch to another branch of the same bank
– Type B account may be converted into Type A account by making application in From B to the bank. In case the depositor doesn’t have Type A account, then he shall make a request for opening an account A in his/ her name.
– If the amount standing in credit of Type B Account is transferred to Type A Account, then such transfer shall be treated as premature withdrawal
– After the conversion of account-B to account-A or vice versa in the manner specified above, the interest in newly opened account or accounts, as the case may be, shall accrue with effect from the date of opening of such account or accounts
5. Rate of Interest on these deposits
In case of Type A account, Interest on amount deposited under these account shall be allowed at such rate as may be specified by Reserve Bank of India and shall be credited to the account at the end of each half year
In case of Type B account, interest on deposited amount shall be calculated at rate specified by the Reserve Bank of India. In case of cumulative deposit in account-B, the amount of interest accrued will be deemed to have been reinvested and in case of non-cumulative deposit in account-B, the amount of interest will become due and payable at quarterly intervals
If the amount is transferred/ withdrawn or account has been closed before completion of period for which the deposit in account B has been made, then there will be one per cent penalty for a premature withdrawal on account of such conversion or withdrawal or closure
6. Withdrawal
Type A account: A depositor may make an application in Form C for withdrawal together with passbook to the bank, on receipt of application the deposit will allow the withdrawal and will mention the amount withdrawn in passbook
Further if the withdrawal request is subsequent request, depositor shall also submit filled in Form D mentioning the utilization of funds withdrawn earlier
Note: if the amount of withdrawal is more the INR 25000, then the bank shall issue crossed demand draft drawn in favour of the person to whom the depositor intends to make the payment.
Type B account: in this case the depositor shall firstly apply to transfer the amount to Type A account (as discussed above), further if the withdrawal from Type B account is before expiry of specific period then the same shall be treated as premature withdrawal and be liable to penal interest
Further the bank has right to refuse the depositor to withdraw any amount lying in his account, in case of failure on his part to furnish all the details as required (such as Form D)
7. Utilization of amount of withdrawal
The amount withdrawn shall be utilized by the depositor within 60 days from the date of such withdrawal for the purposes as stated in respective section
Further if the amount remains unutilized, the same shall immediately be re-deposited in account A
8. Nomination by the depositor
The depositor may nominate maximum three persons to receive the amount standing to his credit in account A or account B by filing Form E
No nominations shall be made in respect of an account opened on behalf of a minor or a Hindu undivided family or a firm or a company or an association of persons or a body of individuals
Fresh nomination may be filed in case there’s any variation in nominations already filed, the application for fresh nominations shall be filed in Form F
9. The amount as standing in Account A or Account B can’t be placed or offered as security for any loan or guarantee.
10. Account closure procedure
The depositor shall make an application in Form G with the approval of Jurisdictional Assessing Officer, and the bank will transfer the balance amount if any to the credit of any bank account of the depositor
If the depositor dies, then the Nominee (if the nomination is in force) or legal heir (if there’s no nomination) shall file an application in Form H with the approval of Jurisdictional Assessing Officer for closure of account to the concerned bank. On receipt of application the bank will transfer the balance amount to the credit of any bank account or nominee or legal heir
Interest earned on these deposit accounts are liable to tax subject to tax law and tax will be deducted by bank and TDS certificate will be issued to the depositor
If the amount remains unutilized even after specified period of 60 from the date of withdrawal, the same shall be taxable as per the applicable provisions under Income Tax Act 1961
Author Bio
My father in law has invested in Capital gain FD under Non cumulative type, where interest is payable at quarterly intervals and it is not re invested in FD . The principal amount of FD is sufficient to cover the Capital gain amount. Therefore can the interest portion of the FD be withdrawn without any utilisation Certificate and can the interest portion can therefore be credited to normal SB account of the depositor and not to Type A Capital Gain SB account? My father in law is a senior citizen who needs interest on the Capital Gain FD for regular expenses.
Dear Sir,
I have deposit Rs. 404000/- in PNB Bank capital gain account u/s 54b against capital gains arise from sale of agriculture land two years ago..
I am fail to purchase agriculture land within 2 year limit and now i pay income tax as per income tax law.
Bank officer says amount use for purchase agriculture land only.
please suggest how i withdrawal the amount in cash
Dear Sir, If residential property purchased in F.Y.2005-06 at Rs.807834/- and sell in F.Y.2021-22 in Rs.9050000/-. what amount should deposit in capital gain account for exemption of tax? What is Time Limit for deposited in CGAS.
Dear All,
I need to know whether the interest earned on TYPE B account can be used for any other purpose (other than buying a new house). Act says that It’s taxable. so, I think the assessee is free to use interest amount for his personal expenses, right?
Interest earned can be utilized for any purposes, after payment of applicable taxes.
Thanks,
I have a question pls answer this
Mr.R owns a residential house which was purchased by him in 2000 for rs 60000(indexed cost of acqusition rs 408000).This house is sold by him on 16/7/2019 for a cinsideration of rs 1750000.Expense on transfer ts 12000.The date of furnishing the return is 30 July 2020 compute capital gain if
A. He invests rs 300000 for purchase of new hose on 14/5/2020
B. He purchased a piece of land for construction of house on 21/10/2018 for rs 200000& deposited rs 100000 in CGAS on 15/7/2020 and further sum of rs 150000 on 31/7/2021
Dear Sir,
Plesae connect on rohitkr.tiwari@yahoo.in or 9958840341.
Assessee had long term capital gain of Rs.8.19 lacs in A.Y.2017-18 and invested Rs.10 lacs in capital gain scheme. However the assesse couldn’t invest it within specified period. He entered into purchase of land on 30.10.2019 for Rs.8.40 lacs. He had already paid Rs.1.00 lac for it and want to withdraw the money from capital gain scheme. Whether form C will require Assessing Officer’s sign or approval? What are tax implications of above transactions? Please guide.
I have sold immovable assets in 2013 and amount was deposited to LTCG A/c, unfortunately i have not utilized the LTCG amount within stipulated time and withdraw said amount in 2021, than what is the tax implement, tax attracted which year.
Surely there will be tax implications on this withdrawal, to know the exact tax liability, please ask your query on:
9958840341 or rohitkr.tiwari@yahoo.in
As Kartha of a HUF, I have deposited Rs 125 lakhs in capital gains A account in a nationalised bank. I wish to withdraw funds in intalments of about 20 lakhs at a time to build a new house for which I have engaged construction workers and want to buy materials myself. Can I ask the Bank to transfer funds in instalments to my personal bank account or the account of my wife, to meet construction expenditure like payments to workers and procurement of materials? Each subsequent withdrawal will of course be in form D giving details of expenditure. Or can the Bank be requested to issue DD in my or my wife’s favour?
We have submitted Form H to close our capital gain.It is taking long time for approval from ITO.How long it will usually take.kindly clarify
Hi,
It depends upon the Assessing Officer, as such there’s no specified time limits in CGAS rules.
For more details you can connect on 9958840341 or rohitkr.tiwari@yahoo.in
Sir
I sold a piece of land in Bangalore and date of transfer is 07/09/2018. Sale consideration was 35 lakhs. Planning to reinvest same in some other property I deposited ₹30 lakhs (0n 07/03/2019) and ₹5.5 lakhs on (27/08/2019). The deposit was under capital gains scheme and duration of 666 days fixed deposit. Now in January first FD had matured and I have not withdrawn the amount yet. I do not plan to buy property now as time limit is short for buying land and construction of house before three years after sale of previous property. I am ready to pay applicable tax now.. What should I do now? Submit form C and withdraw the amount? Or pay advance tax to IT?
Please clarify and guide
I have sold my property for 58 lakhs and i have buyed a prop valued at 1 cr. in same year. now if i want to deposit a cheque for 1 yr of rs.58 Laksh received towards my sale of prop. Have i to open a capital account. If so wht interest will i get for 1 yr. and will the bank deduct any tds on my interest
What’s the implication on the seller who sells his/ her flat. Is it mandatory to open CGAS account as well?
Sir i sell my property in 2018. And open a cgas a/c bank giving me intrest .I open a scheme .I want to know that intrest is taxable .And bank can deduct TDS
I have a capgains account in SBI which I opened in the year 2014 after my property sale in the same year. I missed filing the tax return that year since I was not residing in INDIA.
Can you advise or help in closing the account?
Please advise about the following possibilities:
1) Can I submit the Form G at the branch through my authorized CA?
1.1) In that case, can a Demand Draft/Check can be issued to my name?
1.2) Can we just submit the Form G in advance and withdraw the money sometime later in the year? I am planning to travel as soon as the condition becomes favorable. For example, my CA submits the signed Form G in Jan 2021 and I travel to Delhi in July 2021 and then apply for withdrawal.
2) If my CA can submit the form G now to your branch, can my account be converted into regular savings accounts? I will not be physically present for this process.
3) What is the validity duration of Form G? How long it is going to be valid for submission for the SBI branch to close the account? For example, if we get the Form G signed from the income tax department in the month of January 2021, can I submit the same form sometime in Oct 2021?
can i withdraw interest earned on capital gain account both A and B types, which has been taxed as income in my subsequent IT returns
Hi,
My father had sold a flat and put the money in capital gains account. The aim was to buy another property. He had put me as a nominee.
He passed away last year.
To avoid paying the tax, i will like to buy a flat using the complete funds from the capital gains account.
What is the process.
– Can i as a nominee do this straight away using the existing capital gains account.
Or
– do i need to get the funds transferred first to my account (by closing my father’s account using form H and then open a new capital gains account) and then purchase the property.
Hi,
I had a property for which we opened cap gain account in SBI in 2015. The duration of FD was till May 2018, but somehow the money was still there in cap gain account. That account is showing as inactive now. Now how should we get that money released? It’s approx ₹35L +interest. What should be way to get that money back?
Sir,
I sold my house property on 17th October 2019 in Rs. 22,00,000/- and Deposited entire amount in capital gain account opened in SBI Itarsi branch in March 2020 with the intention to purchase new house property. On filing income tax return it has come to know that there is no capital gain on this sold house property and now I decided to invest this amount in purchasing agriculture land. Now, I want to close my capital gain account what will be the procedure and can I purchase agriculture land by this amount
Kindly clarify whether banker has any authority to know the source of sale proceeds in capital gain account.
If no, then whether he will be responsible to income tax department or not.
Can a person directly transfer funds from his saving account to capital gain account
IF I OPEN AN ACCOUNT UNDER SCHEME B FOR ONE YEAR OR TWO YEARS AND BEFORE THE EXPIRY OF THE SAID PERIOD IF I HAVE TO UTILIZE THE FUNDS FOR PURCHASE OF PROPERTY WILL THERE BE A PENALTY ?
SECONDLY IF IN THE PROPERTY TO BE PURCHASED IF I AM NOT THE FIRST OWNER SAY SECOND OR THIRD, WILL IT BE ALLOWED
I sold my property on 3rd jan 2019 and kept the capital gains in cgss scheme as per law purchase of flat should be done before 3rd jan 2021 telangana govt stopped registrations from sept 2020 till date I made an agreement and paid the amount by NEFT to seller registration may be happened jan last week or Feb first week is it allowable
Dear Sir,
If residential property purchased in 2002-03 at Rs.399000/- and sell in 2019-20 in rs.2500000/-. what amount should deposit in capital gain account for exemption of tax?
Dear Sir,
Thanks to you for providing a detailed article.
Please can you clarify, for year AY20-21, what would be the due date before which one can open a CGAS Account and park funds under Section 54.
Under one Circular, all investments under Section 54 need to be complete by 29-Sept; and the Extension date Circular for ITR filing states 30-Nov as the date(before which CGAS Account can be opened as date forfiling the ITR).