CAPITAL GAIN ACCOUNT SCHEME
Update 2023
Key Details on the 2023 Capital Gain Limit:
In Budget 2023, the government made a noteworthy amendment that can impact investors looking to reinvest their capital gains in residential properties. Here are the key highlights:
Rs 10 Crore Ceiling:
Under the revised tax rules for 2023, the government has established a ceiling of Rs 10 crore for claiming a long-term capital gain tax deduction. This means that if you reinvest the proceeds from the sale of your residential property, and the capital gain does not exceed Rs 10 crore, you may be eligible for a tax deduction.
Benefiting Under Sections 54 and 54F:
The capital gain tax deduction is applicable under Sections 54 and 54F of the Income Tax Act. Section 54 pertains to capital gains from the sale of a residential property, while Section 54F deals with capital gains from the sale of any asset other than a residential property. Both sections offer tax relief when you reinvest the gains in specific residential properties.
TABLE OF CONTENTS
- What is a Capital Gain Account?
- Who can open a Capital Gain Account?
- Type of Deposit
- Application for opening of account
- Transfer of the Account
- Interest
- Withdrawal from the Capital Gain Account
- Utilization of the Amount
- Nomination of the Account
- Charge or Alienation
- Closure of the Account
- Must-Know before opening Capital Gains Account
- Various Forms for operating the Account
WHAT IS A CAPITAL GAIN ACCOUNT?
Selling off property may attract a liability to pay Capital Gains Tax. However, the government offers tax relief to individuals who reinvest their capital gains to any other specified asset within a specified period. You can park your funds in a Capital Gain Account under Capital Gains Account Scheme 1988, for the time being, until it is reinvested, and can claim exemption of Long Term Capital Gains Tax on sale of Capital Assets.
This Account can be opened in authorized branches of SBI and other PSU Banks. Rural Branches of these banks are not authorized to open
capital Gain Account.
WHO CAN OPEN A CAPITAL GAIN ACCOUNT?
Any Resident Individual, a body of Individuals,
Non-Individuals like Partnership Firms, Companies, HUF (Hindu Undivided Family),
etc., Non-Resident Indians (NRIs), Resident but not Ordinary Resident (RNOR),
Artificial judicial persons who have capital gains, taxable in India.
A deposit can be made under the provisions of section 54,
section54B, section 54D, section54F, or section 54G by any depositor intending
to avail the benefits of the scheme.
TYPES OF DEPOSITS
You can keep your funds in two types of deposit accounts:
1) Deposit Account-A – which shall be in the form
of Savings Bank Deposit
2) Deposit Account-B - which shall be in the form of Term Deposit
APPLICATION FOR OPENING OF CGAS ACCOUNT
A depositor shall apply in Form A to the bank and has the
option to deposit the amount in Deposit Account-A or Deposit Account-B or both.
The payment for the deposit can be made in cash, crossed cheque, or demand
draft along with the application. The interest on the deposit shall be payable
as per the prevailing rates on the type of deposit you have made.
In the case of Deposit Account-A, you will receive a
passbook from the bank and in the case of Deposit Account-B, you will be issued
a receipt by the bank. In case of loss of passbook or receipt, you can apply
for a duplicate copy to the bank and the same will be issued to you.
TRANSFER OF THE CGAS ACCOUNT
An account can be transferred from one branch to the other branch of the same bank. Any deposit in Deposit Account-B shall be first
transferred to Deposit Account-A by way of premature withdrawal or at maturity withdrawal by applying by Form-B. The Deposit Account-A can then be transferred to the other branch of the same Bank.
In case, you do not have a Deposit Account-A, and only
have Deposit Account-B, you need to open a Deposit Account-A first, then
transfer the funds to it, and then request for transfer of the account to another
branch. After the transfer of your account, you can again request to open a Deposit
Account-B from the funds kept in Deposit Account-A.
INTEREST ON CGAS
Interest rates prevailing for the Regular Savings Account
Deposits and Term Deposits are applicable to the deposits made in this scheme.
Interest due at the end of each half-year will be credited to your account. Interest
earned on both Deposit Account-A and Deposit Account-B is liable to tax. TDS
will be deducted from authorized personnel and a TDS certificate will be issued
to you.
WITHDRAWAL FROM THE CGAS ACCOUNT
You have to apply in Form C along with the passbook for the withdrawal of the amount kept in Deposit Account-A. Except for your first
withdrawal, you need to furnish Form D in two copies furnishing the details regarding the manner and the utilization of the funds of the immediate previous withdrawal. One copy will be retained by the bank and the other will be given
to you by duly authenticating it.
If the amount to be withdrawn from Deposit Account-A is more than Rs. 25,000/- the payment will be made by way of crossed Demand Draft
in favor of the person you intend to make payment.
If the withdrawal is to be made from Deposit Account-B,
you shall first apply to transfer the amount to Deposit Account-A by Form-B and
then proceed for the withdrawal from Deposit Account-A as mentioned above.
Note- In case of failure of furnishing the details of
utilization of the previous withdrawal, the bank may refuse your request for further
payments.
UTILIZATION OF AMOUNT WITHDRAWN
Any amount withdrawn from Deposit Account-A has to be
utilized for the purpose of reinvesting in any other property or specified
assets for which the deposit was made. The amount shall be utilized by you
within sixty days from the date of withdrawal. If the amount has not been utilized
within 60 days, it has to be re-deposited in Deposit Account-A immediately thereafter.
If not re-deposited, it is subject to taxation as per the income tax laws.
NOMINATION BY DEPOSITOR FOR CGAS ACCOUNT
You can nominate up to three persons by filing Form E for
your Deposit account. In case of your death, the nominee shall receive the
amount in your deposit account. However, the nomination cannot be made for
accounts opened on behalf of a minor or HUF, firm, companies, an association of
persons, a body of individuals.
You can fill Form F to change the nominations made to
your deposit accounts and update the same in your passbook or receipt as the
case may be.
If your nominee is a minor, you can appoint an adult
person to receive the amount due, in case of your death for the minority period
of the nominee.
If you make more than one nomination, the nominee first
named shall alone have the right to receive the amount in your deposit account.
If the first nominee has also died the nominee second named shall receive the
amount in your deposit accounts subject to producing proof of death of the
nominee along with the proof of death of the depositor.
CHARGE OR ALIENATION ON CGAS ACCOUNT
Any amount deposited in both Type-A and Type B accounts cannot be kept as security or collateral for any loan. Also, it cannot be used
as margin money for any non-fund-based facility.
CLOSURE OF THE CGAS ACCOUNT
If you wish to close your account, you should make an application to the bank by Form G along with the approval of the Assessing
Officer of your jurisdiction. The closure will be subject to terms mention in the authority letter of the Income Tax Department Official.
In case of your death, if you have made a nomination to
the account, the nominee shall apply in Form H along with the approval of the Assessing
Officer of your jurisdiction. The bank will then credit the amount to the
nominee in his bank account.
In case, you have not nominated any person, your legal
heir should follow the same procedure, subject to if there are more than one
legal heirs, the legal heir who is making the claim shall have to produce the
letter of disclaimer or letter of authorization from other legal heirs.
In this case, the Assessing Officer also shall obtain a Succession
Certificate or a Probate of the will of the depositor or any letter of
administration in case there is no will.
In all the above cases of closure of an account, passbook
or receipt (as the case may be) of the account has to be submitted to the bank.
Must know points before opening a Capital Gain Account
You should open a CG account only if you are not going to
invest your gains before the due date of furnishing the Income Tax Return. The Loan
Facility is not available on CapGain Deposits. They can also be not used as
collateral or margin for any non-fund-based facilities.
At the time of closure of the account, the depositor will have to produce a specific authority letter/certificate from Assessing Officer who has jurisdiction over the depositor. The closure would be permitted on the terms mentioned in the letter of authority.
Also Read
Various Forms used for the operation of Capital Gain Account
|
Form A |
Application for opening an account |
|
Form B |
Application for conversion of accounts
from Type-B to Type-A or vice versa |
|
Form C |
Application for withdrawal of amount from account-A for the first time |
|
Form D |
Details regarding the manner and extent of utilization of the amount withdrawn from the account |
|
Form E |
Add Nominee to the Account |
|
Form F |
Change Nominee to the Account |
|
Form G |
Application for closing the account |
|
Form H |
Application for Closure of Account by
Nominee/legal heirs |
Disclaimer:
This article is intended for informational purposes only, and should not be considered financial advice. You should consult a financial professional before making any financial decisions.
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