Capital gains arise when the consideration received on transfer or sale of a property is more than its indexed cost. The amount of capital gains that is not appropriated by an assessee towards the purchase of another property before one year from the date of transfer or within two year from the date of transfer of the original property or constructed within 3 years from the date of transfer, or that is not utilised by him for the purchase or construction of a new property before the date of furnishing the return of income, should be deposited by him in a specified nationalised bank. The amount should be invested in a ‘Capital Gains Account Scheme‘ under the Capital Gains Account Scheme, 1988. The scheme is applicable to all assessees having capital gains. The deposits may be made in one lump sum or in installments at any time. The amount should be deposited before the due date for filing income tax returns. Section 54/54F & time limit for deposit/ reinvestment of capital gain
Page Contents
- 1. Who are eligible to take the advantage of Capital Gains Account Scheme?
- 2. List of Banks who can Accept Deposit under Capital Gains Account Scheme
- 3. Account Type Under Capital Gains Accounts Scheme
- 4. How to withdraw from Capital Gains Accounts Scheme
- 5. Opening a bank account for Capital Gains Account Scheme
- 6. Things to Keep in Mind while opening Capital Gains Account Scheme
1. Who are eligible to take the advantage of Capital Gains Account Scheme?
Mainly, the advantage of Capital Gains Account Scheme can be derived by individuals and Hindu Undivided Family. To be more precise, all those tax payers who would like to invest in buying a residential property or in constructing a residential property so as to save tax in respect of long-term capital gain can find much advantage in this scheme known as Capital Gains Accounts Scheme 1988.
Before analysing the salient features of this scheme, it may be recalled here that to save tax on capital gain, various provisions are contained in the Income Tax Act, 1961 whereby if investment is made one year from the date of transfer or within two years from the date of sale/or constructed within 3 years from the date of sale one can save capital gain tax in respect of long-term gain, especially if the investment is made in acquiring another residential property.
Similarly, if the tax payers were to construct a residential property then the time period for completing the construction is within three years from the date of sale. Now, in between comes the role of Capital Gains Accounts Scheme.
All those tax payers who are taking advantage of the above mentioned schemes of making investment in residential property are advised to take advantage of the Capital Gains Accounts Scheme, especially if they are not able to make investment in residential property by the last date of filing the income tax return.
For example, if a person derives long-term capital gain on April 10, 2010, in that event he must make the investment in acquiring new residential property within two years from the date of sale or when the said property is proposed to be constructed then within three years from the date of sale.
However, there is also a condition that if the tax payer is not able to buy or construct the said property by the last date of filing the income tax return, in that event the amount has to be deposited in the Capital Gains Accounts Scheme. For example , as mentioned above, if the property is sold on April 10, 2017, the tax payers can buy or construct the property by July 31, 2018 (extended to 31st August 2018 for A.y 2018-19), which happens to be the last date of filing the income tax return.
In a situation where such purchase or construction is not completed by 31st August 2018 in that event the money must be deposited on or before 31st August 2018, that is, the last date of filing the income tax return in terms of the Capital Gains Accounts Scheme.
2. List of Banks who can Accept Deposit under Capital Gains Account Scheme
The account under Capital Gains Accounts Scheme cannot be opened in all the branches and with all the banks. The government has identified the following 28 banks to accept the deposit under Capital Gains Accounts Scheme 1988. These banks are: State Bank of India, Central Bank of India, Bank of India, Punjab National Bank, Bank of Baroda, UCO Bank, Canara Bank, United Bank of India, Dena Bank, Syndicate Bank, Union Bank of India, Allahabad Bank, Indian Bank, Bank of Maharashtra , Indian Overseas Bank, Andhra Bank, Corporation Bank, New Bank of India, Oriental Bank of Commerce, Punjab & Sind Bank & Vijaya Bank. All branches of these banks except the rural branches are authorized to receive the deposit and maintain account under Capital Gains Accounts Scheme, 1988. Other than the above, no other bank is authorized to accept the deposit under Capital Gains Accounts Scheme.
3. Account Type Under Capital Gains Accounts Scheme
Under the scheme there can be two types of accounts-
i. Deposit Account A:
This account is like a savings deposit account. Withdrawals may be made from the account from time to time, subject to other conditions of the scheme. This account is suitable for assessees who are planning to construct a house over a period of time.
ii. Deposit Account B:
This account is like a term deposit that is payable after a fixed period of time. The interest earned on the deposit may either be withdrawn periodically or it may be reinvested.
In order to open the account, an assessee must fill up the prescribed application form in duplicate. Further, the type of account – A or B – is to be specified. In case Deposit Account B is opted for, it has to be specified whether the account will be cumulative or non-cumulative. The proof of such deposit should be attached with the income tax returns.
Both the accounts will be eligible to interest as per the guidelines of the Reserve Bank of India. Moreover, a depositor may make or change nominations to the account by filling in the relevant forms.
The amount can be utilised in accordance with the scheme which the Central Government may frame. The amount withdrawn should be utilised for the purpose of purchase or construction of a house.The amount withdrawn should be utilised for the purpose within sixty days of the withdrawal. Any unutilised amount should be redeposited in Deposit Account A.
The amount already utilised by an assessee for the purpose of purchase or construction of a new property together with the amount deposited will be deemed to be the cost of the new property. In case the amount deposited is not utilised wholly or partly for the purchase or construction of the new property within the period specified, then the unutilised amount will be charged as income(as LTCG) of the previous year in which the period of three years from the date of the transfer of the original property expires.
4. How to withdraw from Capital Gains Accounts Scheme
Further, an assessee will be entitled to withdraw the amount in accordance with the provisions of the scheme.
The withdrawals from Deposit Account A can be made through a prescribed form. In case of Deposit Account B, a depositor will first have to transfer the amount to Deposit Account A, and then make the withdrawal. The amounts can be transferred from one branch of a bank to another branch of the same bank only. A depositor may close the account with the approval of the assessing officer.
Forms C and D – Similarly, it is possible to convert the deposit Account B to the deposit Account A. As and when the money is required to be withdrawn for the purposes of making payment for the residential property, the assessee shall apply in form No C. After receiving the application the bank shall permit the withdrawal of the amount. It may also be noted here that where the amount of withdrawal exceeds Rs 25,000, the bank will make the payment by way of crossed demand draft drawn in favour of the person to whom the depositor intends to make the payment. Tax payers should also note that other than the initial withdrawal later on when the withdrawals are made by the tax payers, they shall furnish in Form No D in duplicate, the details regarding the manner and the extent of utilizing of the amount in respect of the immediately preceding withdrawal. The bank after receiving two copies of Form D from the accountholder will retain one copy and return the other copy to the tax payer.
Forms E and G- 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. Finally, when the property has been purchased or the construction has been completed and now the tax payer desires to close his Capital Gains Account Scheme then he shall make an application with the approval of the assessing officer. The application for closure of the account will be in Form G. Whenever you are contemplating to make a deposit in respect of Capital Gains Account Scheme, either by way of a savings account or a fixed deposit account , then please remember that you do not open the normal savings bank account or a normal saving bank deposit but specifically fill up No A and then make the deposit with the concerned bank under the Capital Gains Accounts Scheme.
5. Opening a bank account for Capital Gains Account Scheme
Once the deposit is made by you either in the savings account or in the fixed deposit account, please ensure that it is clearly mentioned in the account opened that it is for Capital Gains Account Scheme. A large number of tax payers commit the mistake of just opening a bank account with a bank to save capital gains and later on use the money for buying or constructing the residential property. But please do remember that the income tax law very specifically provides that the money which has not been used for buying or constructing a residential property, such money should be kept exclusively under Capital Gains Accounts Scheme under a separate bank account in terms of Capital Gains Accounts Scheme. Also do remember that the deposits in these accounts can be made in one lump sum or in instalment.
6. Things to Keep in Mind while opening Capital Gains Account Scheme
- CGAS does not allow any withdrawals, except for the specified purpose (of buying the house), even of interest. More, the investor is required to pay tax on this interest (to which he has no access) on an accrual basis out of his other income.
- Even if the sale is effected in, say, the first month of the financial year (say, April 2017), the taxpayer may deposit the amount in CGAS on the last date for filing returns. In other words, he can freely utilise this money for 15 months (April 2017to July 201 For A.y 2018-19 it can be used till 31.08.2018 as the return filing date has been extended) as he likes.
- We have already discussed the fact that if the amount is not utilised wholly or partly for the desired purpose, within the specified period, the unutilised amount shall be treated as capital gains of the year during which the specified period expires.
(Republished with Amendments)
Hi,
I have sold 1 property in Jan 2014 and 1 in Sept 2014. and have deposited the amount of both the considerations in CGAS before 30th Sept 2014 (as i’am covered under Tax Audit).
Now, in January 2016 2 years from the date of sale is about to get completed and i have not utilised the amount anywhere, neither in purchase of any property nor in construction. So what provisions to i need to follow..
Do i need to pay tax in Current F.Y 2015-2016 or do I have to Wait for one more year.?
Kindle Revert me with your valuable reply.
Thanks
Regards
Deepak Gupta
I had capital gain by selling my flat an year ago. I deposited the capital gain as 4 different deposits for 6 Lakh each.
Now for buying a new house, i want to give advance of Rs 6 lakhs and for this i want to withdraw one deposit.
What is the procedure i need to do to satisfy income tax rules? Will it come under closure or withdraw? For withdraw i udnerstand form c has to be used. For closure, i saw that income tax officer has to approve.
My question is that if i want to take a part of the deposit for advance, do i need to get any permission from income tax officer?
My sister-in-law deposited IRS.14,50,000/- in the long term capital gains for 36 months
at Canara Bank. Now it has already expired and overdue by 6 months. The banker says that she has to pay IRS.45,000/- as income tax for the matured fixed deposit of IRS.21,00,000/- Kindly let us know whether the income tax comes to IRS 45,000/- My tel no.9886922113
Regards
kalyani
Is this applicable to ESOP ?
If the sum received from buy back offer of unlisted share can be invested in capital gain accounts scheme ?
Please guide
Superb Article. Very Informative
I have a residential plot.Now I want to purchase a Builder Floor at Gurgaon.The Builder floor constructed by some Construction company.The Plot Owner has signed an agreement to construct the Three floor at his own cost & after compelition of all three floors, right of one floor for sale will be to construction company & that can be sell by company.During construction we are paying the cost of on floor in installment to construction company.after compelition of the Floor, The one floor will be transfered to me.
Now let me know that,can we pay the cost to construction company in EMI.
CAN WE WITHDRAW CASH FOR NEW RESIDENCIAL HOUSE DEED REGISTRATION FEES FROM CAPITAL GAIN ACCOUNT ?
I am a joint owner of my later father house. The house unable to use jointly so that decided to sale out.
Apart from above I have another residential house.
Can we save capital gain tax arise on selling of my late father house by extension of my existing house?
-Jigar
valuable information.
HI
I had purchased a land in 2005 for 1.9L and sold in 2014 for 12.1L. Based on cost inflation index the gain is around 8L. I am investing this in buying a new apartment. To open a capital gain account, should I invest actual selling amount 12.1L or the net gain which is 8L. Please let me know
Regards
I have purchased plot on feb 2001 after six year a one room set constructed onmy plot.In july 2013 It was saled. Total sale amount deposit in FD what can do for tex saving
Does anyone know where I can find a blank C and D Form to fill out?
i have sold a flat this year which was bought 5years ago.
I intend to deposit the amount received from the sale in a capital gain account scheme.
Can somebody please guide me on 2 questions ?
How much do I need to invest in the capital gain account scheme, the complete proceeds or only the capital gain on the sale.
If entire proceeds needs to be deposited, in this case since I have already used a portion of the proceeds towards repayment of my bank loan, what are the option available with me ?
I want to transfer my CAGS account from one bank to another as existing bank charges huge demand draft commission on each withdrawl. What is the process of moving from one bank to another. Secondly, Inadvertently, I have invested whole sale proceed of my flat in CAGS account instead of only CG amount. How can I withdraw excess amount.
Please guide
As per the capital gains deposit account scheme, the bank while withdrawing money gives the demand draft/bankers cheque. but while giving banker’s cheque the bank has deducted the commission for issuing the Demand draft. Are the bank’s allowed to charge such commission.
I want to open the cgas account but this account kept for two year without using anywhre place and its automatically will transfer in saving account.???
Recently we sold a family property and all the legal heirs got the share of purchase consideration, MY wife is one of the beneficiary and wish to avail the benefit of capital gain tax exemptions.
She propose to buy a residential property (flat) JOINTLY( 50% share) with her brother who is also one of recipient of the sale proceeds.
I wish to know in such case whether both are eligible for the capital gains for the amount they have invested in the new property.
PLEASE GUIDE IF CONSIDERATION RECEIVED ON SALE OF PROPERTY, CAN
BE PARKED IN CAPITAL GAIN ACCOUNT WITH JOINT NAME.
Please inform whether consideration received on sale of property can be
parked in capital gain account, with joint names.
I bought Agriculture land value of Rs. 20 lacks. Am I have any tax benefit?
I am NRI purchased land with residential building on 28/11/2011 total purchase cost 33 lakhs.Now the whole property is going to sell to a govt office ,total sales cost 2,60,00000. The whole payment by cheque or draft.
.I already have another residential house.Now I want to save capital gain as I am going to buy new property to construct residential house.
The buyer,Govt company, insisting TDS at the registration time which is not acceptable for me.If I am prepared to deposit the whole capital gain amount with capital gain account scheme with approved bank ,can I insist them not to make TDS at the time of registration of the selling property.
Could you suggest what are the methods by which I can insist them not to make TDS at the registration of the property.
Sir,
Really appreciate the good article.
I sold a property in March 2015, did not deposit the amount in CGAS. The entire amount was paid to another builder after 1st April 2015. The building will be completed in October 2015 and will be registered in my name during December 2015. How do I deal with this in the return to be filed before 31st July 2015.
Thank you!
There are lot of overdue deposits under capital gains term deposits. How banks have to handle these deposits
There are many grey areas evident from the queries raised here.
CBDT shall revisit and bring out FAQs.
very good article.useful to all.
Sir, I also Deposit the CGAS Scheme but deposit after one year i.e. one years 3 days of sale of property. Can i use this scheme ot not.
Shall I utilise this amount from CGA for the repayment of house loan already purchased in the previous years.
with regards
Is it applicable for capital gains made on account of sale of property only or is it applicable on capital gains made otherwise ( Ex: Sale of Shares etc) Pl advise
Sir
is it possible that I open Capital Gain Secheme Account and keep money there for more years to avoid long terms capital gains by sale of property. I do not purchase another property. By keeping fixed deposit in CGSA can I save capital gain.
I shall obliged for reply.
I entered into a JDA with a builder in 2011 and by that jda it was agreed that I would be given 2 flats and some cash. The land was not sold to the builder – he had only the construction rights through a POA. I got the possession of the flats in 2014 Feb after the development was completed. I have sold one of the flat recently. I have deposited the money in a capital gains account and plan to invest the money in a new property.
Are there any short term or long term tax implications?
Please advice.
Thanks, Tridip
I’m one of the promoter of the private limited company which is not listed established in 1994 . In December 2014 I sold my shares in to another partner. Now I want to know to save capital gain tax what I should do.
what is the time limit to utilize the amount kept in capital gain account. when the limit start? whether from date of sale of property or from depositing the amount in capital gain a/c. also please clarify whether the interest accrued can be use for purchase of new property.
In case assesse withdraw more than Rs.25000 fron CGAS in cash , then who is liable for this mistake ,Is any case avialable regarding to this problem.
We sold the property in dec 2012 and deposited profit in capital gains account. At the time we had odentofied the property we wanted to purchase but that deal fell thru. So we paid revised tax on profit and wanted to withdraw money from capital gains account. It has been more than a year and we are still getting run around from income tax office and accountant. Can you please tell us waht is the procedure we have to follow
Thank you very much for your help
Nisha
We opened CGAS account on 23-10-2013 with deposit of Rs.20 Lakhs. and the same was utilized for purchase of plot and the CGAS money was allowed send to the seller of the property by 29th October 2013 through RTGS facility of the bank. We were not aware that we had close the account immediately. And still balance of Rs.960/ is in the CGAS a/c.
Also I had by mistake transferred Rs 6 Lakhs from my savings account to my CGAS account in the same Bank instead of sending it to one of my Loan account on 17-09-2014.
How do i recover that money from CGAS Account?
Please help us in this regard.
Thanks,
Ranganathan
what finally happens to the interest earned on closure of account?.
1. one cannot withdraw it.
2. one pays tax on it
3.
It is very useful information to general public
I have recently purchased a flat by availing a loan of Rs.10 lakh and the registration is completed. I have another old flat, which i intend to sell now. Can the amount gained from sale of the old flat be adjusted to the loan availed for purchase of the already acquired new flat, to avoid Capital Gain Tax?
Very useful and informative article on Capital Gain Deposit Account Scheme. Thanks a lot
Withdrawal of Unutilised fund from Capital Gain Account in Nationalised Bank :
There was a capital gain on sale of shop on 22.9.2010 & said capital gain was deposited in capital gain account in State Bank before due date of IT return.
Now after completion of 3 years, said capital gain amount is not utilised for purchase of any residential property.
What is the exact procedure to withdraw the unutilised capital gain amount which was depsited in capital gain account.
Only payment of Income tax on said capital gain in current F.Y.2013-14 is sufficient to withdraw the amount from capital gain account.
Interest credited in above capital gain account was already added in respective year income then any need to pay any further tax on the withdrawal of said interest accrued in capital gain account.
Kindly reply.
Thanks in advance.
I sold a flat in Oct’08, which was purchased in 1984, and deposited the capital gains amount in a CGAS immediately. I utilised only 70 % of the CGAS account for purchasing a new flat whose delivery was taken in Sept’10. The question is whether any advance tax payable on the balance 40% amount in the Q3 or is it sufficient to pay the requisite tax before by the last date of filing return for the AY 2011-12?
IDBI is also authorised to accept deposits in the case of Capital Gains Accounts Scheme
What are the consequences if one does not deposit in Capital Gain Account Scheme within the time limit????
Very good article.
It is laid down that the assessee has to deposit Capital Gain amount in specified bank in Capital Gain Account Scheme before filling the return of income..i.e. say upto 31 july.
Here suppose in a given case assessee has long term capital gain u/s.54F(transfer of long term assets other than house property) in the month of May 2010, and he does not file his return of income by due date July,2011 and he also does not deposit the Capital gain amount in the specified Capital gain scheme by July,2011. But he purchased the new Residential House before 31st March,2012 and file his belated return before 31st March,2012.
What are the consequences? As he does not deposit Capital Gain amount in Specified Capital Gain Scheme.
Can an NRI with CGD Account invest in Canada House Property?
Very good and informative article.
I would however like to know whether the re-investment on property out of CDAS has to be essentially made on property in India only or it can be invested in property out- side India – say Canada, if the account holder happens to be an NRI.
Very good and informative article on Capital Deposit Account Scheme.
I would however also like to know whether the re-investment from CDAS in the property has to be essentially made in India only or it can be invested in property in Canada if the account holder is an NRI.
Very nice article .. in depth! keep up the good work !
Request the author to confirm whether Capital Gain B Scheme is still in vogue. Is there a specific stipulation that the interest on fixed deposit cannot be utilised? Can the author arrange to furnish the notification itself with latest amendments?
GOOD ARTICLE WITH CLARITY ON DIFFERENT ASPECT OF CAPITAL DEPOSIT ACCOUNT
Very informative. Thank you!