Capital Gains Accounts Scheme (CGAS), 1988

What is Capital Gains Account Scheme, 1988?

The Capital Gains Account Scheme (CGAS) of 1988 is a scheme introduced by the Government of India under the Income Tax Act, 1961. It provides taxpayers with a means to save on capital gains tax by depositing the proceeds from the sale of certain assets into designated accounts. These accounts are maintained with authorized banks or financial institutions.

The tax payers can avail of the benefit of exemption from Capital Gains, if the amount of Capital Gains or the net consideration is deposited in the public sector bank on or before the due date of filling a return of income by the tax payers.

Who can Deposit in Capital Gains Account Scheme, 1988?

What is the Time Limit for Depositing in CGAS, 1988?

The Income Tax Act provides opportunities to minimize capital gains tax liabilities through Sections 54, 54F, and 54EC. Under these provisions, taxpayers can mitigate their tax burden by reinvesting their capital gains in specific avenues.

Section 54 and 54F allow individuals to save on capital gains tax by investing the entire proceeds from the sale of a property into a residential property. Alternatively, Section 54EC offers tax relief for investments in specified capital gains bonds. These investments must be made either within one year before the sale of the property or within two years following the transaction.

What is the Eligibility for Depositing in CGAS?

Below are the conditions that should be met before depositing in the CGAS account -

• The taxpayer should have capital gains from the sale or transfer of assets specified in sections 54 to 54GB.
• The CGAS scheme is applicable only to Indian residents. Non-residents have to open a non-resident CGAS account (NRCGAS).
• The depositor has to furnish proof of capital gains from the sale of the specified assets.

How to Open a Capital Gain Account Scheme?

Follow the below-mentioned steps to open a Capital Gains Savings Scheme account -

• Fill out form A and submit it along with necessary attachments like address proof, photo, and a copy of your PAN card.
• Now make the deposit using a cheque, cash, or demand draft. If you are depositing the amount through cash or cheque, the date of deposit will be the date on which the draft is received.
• You can deposit lump sum money or in installments.
• You need to open separate accounts if you wish to invest in various types of assets under different sections.

What are the Types of Deposits Available in Capital Gain Account Scheme?

There are 2 types of deposits that individuals can avail of under the Capital Gain Account Scheme, 1988 -

• Type A - Type A, also known as a savings account, pays you an interest similar to that of a savings account. The Capital Gain Account Scheme interest rate is also similar to a savings bank account. Also, it is liquid in nature, making it easy to withdraw it at any time.
• Type B - The type B accounts under the Capital Gain Accounts Scheme are very similar to a fixed deposit or a term deposit. This type of account can be held for a maximum of 3 years. Also, the Capital Gain Account Scheme interest rates are similar to that of an FD.

What are the Tax Implications of CGAS?

While depositors can claim exemption of the capital gains under this scheme, there are a few other tax implications.

• According to the Income Tax Act of 1961, depositors are required to submit proof of capital gains at the time of filing their ITR. Income Tax Returns do not allow you to annex any document. Therefore, you must keep the proof handy for later.
• Any interest earned on Type A as well as Type B accounts is chargeable to tax. TDS is deducted, and a certificate is issued to the depositor.
• If the amount withdrawn is underutilized after 60 days of withdrawal or after the given time limit, it is chargeable to tax.

Amount deposited in CGAS if not utilized within a specific time period, can lead to withdrawal on the capital gain exemption and will be taxable. To know in detail about the capital gain exemption under the capital gain scheme, consult with our experts.