Capital Gain Account Scheme

Capital Gain Account Scheme 

What is Capital Gain Account Scheme

Capital Gain Account Scheme (CGAS) allows Individuals to safeguard their long term capital gain until they are able to invest it specified in sections 54 and 54F.

Section 54

The taxpayer can invest the long term capital gain (LTCG) made from sale of an immovable property , in residential property. Taxpayers such as partnership firms, LLP’s, companies or any other association or body cannot claim tax exemption under section 54.

These condition are following under section 54:-

1. Asset should be long term capital asset.

2.The asset sold is residential house. Income from such a house should be chargeable as income from             house property.

3.The seller should purchase residential house within 1 year from date of sale. Seller is constructing a               house, then the seller will have to construct the residential house within 3 years from date of If the seller       will not complete construction within 3years then  indirect included in their capital gain from house                  property under section 54.

4.The residential house should be in India. The seller can not buy a new house in abroad and claim the            exemption.

5. A capital gain exemption is available for two  residential house purchase  in India. the exemption is               subject   of the capital gain not exceeding of 2 crore. This exemption is available for once in life time of           seller.

 What is the amount of Exemption available under Section 54 of the Income tax act?

The amount of exemption under Section 54 of the Income Tax Act for the long-term capital gains will be the lower of:

Long term capital gain arising on transfer of residential house.

                                         Or

Investment made in purchase or construction of a new residential house property. Hence, the balance capital gains (If any) will be taxable.

Section 54F

Exemption under section 54F in available on long term capital gain on sale of any asset other than a house property.

Circumstances to be fulfilled for availing exemption under section 54F –

The assessee needs to satisfy the following conditions in order to avail exemption under section 54F of the Income Tax Act –

1. An exemption under section 54 F is available only to an individual and Hindu undivided family (HUF).

2. An exemption is available towards the capital gain arisen on the transfer of any long term capital asset          other than a residential house.

3.The ‘net consideration’ arisen on the transfer of long term capital asset is invested in either of the                   following manners –

4.The amount is invested to purchase one residential house in India. It is compulsory that such investment        is made within a period of 1 year before or 2 years after the date of transfer; or

5.The amount is invested, within a period of three years, to construct one residential house in India.

 How many types of Capital Gain Account Scheme?

Two types of capital gain account scheme:

1. Savings Account

A capital gains savings account is similar to the regular savings account in any bank. The applicable interest rate is also the same as that given on regular saving schemes. You will receive a passbook that has records of all transactions deposits, interest received, withdrawals made in the account. The amount deposited in this account will have high liquidity and can be withdrawn any time.

2.Term Deposit Account

A capital gains term deposit account is similar to the fixed deposit of banks. The applicable interest rate terms and surrounding withdrawal  before the maturity remain as the Bank’s FD scheme. So if taxpayer  will be withdraw then  he will pay premature withdrawal penalty as per bank term and conditions. If  taxpayer  will a deposit then he will receive deposit receipts by  the bank , principal deposit ,date of deposit, date of maturity and rate of interest are specify in the deposit receipt.

 Banks notify by government  for Capital gains account scheme :-

This scheme was started in 1988, and the account can be opened in any 28 bank in which notified by the government.

Following the bank notified by the government:

1. State bank of India
2. Syndicate Bank
3. Central Bank of India
4. IDBI Bank
5. Bank of Baroda
6. Corporation Bank etc.

 What is procedure of open the capital gains account and manner of deposit?

1. Documents required PAN , address proof, photograph.
2. Capital Gains account can be opened by making an application in duplicate in Form
3. Deposit can be made by any mode such as cash, cheque, demand draft etc.
4. Deposit can be made either in lump sum or Installments.

 How  to withdraw money from a capital gain accounts?

To withdraw money from a capital gains account, you need to make an application through Form C. Once the withdrawal is made, you need to utilise it within 60 days and it cannot be re-deposited in the account immediately. If a second withdrawal is required, you need to make an application through Form D.

 if taxpayer  will be withdraw then  he will pay premature withdrawal penalty as per bank term and conditions.

A capital account  can be opened by the only individuals and Hindu United Families, and no loan can be take based on this account. If taxpayer want to nominee after own death they can use form E, and changing nominee can be use form F.

Who can deposit in Capital Gain Account Scheme?

Under the Income Tax Act 1961, Section 54 to 54F, taxpayers who have capital gains and are eligible to invest in the Capital Gains Account Scheme have been mentioned below:

When can deposit in capital gains account scheme?

Taxpayer who are unable to reinvest their capital gains in specified investment, before the specified time limit has expired for that investment, and before income tax returns furnished . the taxpayer have to deposit  the capital gains from the capital gain account. This is to be done before the income tax return furnished.

Transfer of Capital Gains Account

1. A depositor , he can apply if he want to transfer of his capital gains account from a branch to another            branch of the same bank.

2. A depositor, he can apply from Form B, he want to transfer all funds from A type account to B type                account.

3. A depositor , he can apply if he want to convert whole account from type A to type B.

4. A depositor, he want to transfer fund before the specified expiry date , the request will be treated as              premature withdrawal amount.