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Capital Gains Account Scheme ( CGAS )

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Sakshi Shah

Capital Gains
Capital Gains Account Scheme
Capital Gains Exemption
Last updated on May 21st, 2021

CAGS Scheme i.e. Capital Gains Account Scheme was introduced by the Central Government in the year 1988. A taxpayer who wants to claim an exemption under Capital Gains has an option to open a CGAS account and deposit the funds in it till the time he/she plans to invest in the specified investment as per Section 54 to 54F.

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What is Capital Gains Accounts Scheme or CGAS?

When there is a sale of a capital asset, such an income or loss is called Capital Gain or Capital Loss. If such Capital Gain is re-invested into a specified asset within a specified time limit, the taxpayer can claim a capital gain exemption under Section 54 to Section 54F. Sometimes, the specified time limit is long and goes beyond the due date of filing the tax return. In such cases, it becomes difficult to determine whether the Capital Gains would be taxable or not. Thus, the government introduced the concept of the CGAS Scheme i.e. Capital Gain Account Scheme in the year 1988. As a part of this capital gain scheme, the taxpayer has the option to open a CGAS account and park the funds till the time they are re-invested to claim the exemption under Capital Gains. Such funds must be deposited before filing the Income Tax Return.

However, if the taxpayer does not utilise the amount in CGAS for the specified investment within the specified time limit, the Capital Gain exemption claimed in the ITR filed would be withdrawn. The entire amount of Capital Gain becomes taxable.

When can taxpayer deposit in Capital Gains Accounts Scheme?

The taxpayer can deposit the amount of capital gains in the CGAS account in the following cases:

Taxpayer Type Section Capital Gain on
Individual / HUF Sec 54 Sale of residential house
Individual / HUF Sec 54B Sale of agricultural land
Any taxpayer Sec 54D Compulsory acquisition of land and building
Any taxpayer Sec 54E Sale of long term capital asset
Any taxpayer Sec 54EC Sale of long term capital asset being land or building
Individual / HUF Sec 54F Sale of long term capital asset not being a residential property
Any taxpayer Sec 54G Transfer of Asset if there is shifting of an industrial unit from an urban area
Any taxpayer Sec 54GA Transfer of Asset if there is shifting of an industrial unit from an urban area to SEZ
Any taxpayer Sec 54GB Transfer of a residential property

How to open CGAS Account?

A taxpayer can open the CGAS Account with any of the authorised banks excluding the branches in rural areas.

To open the CGAS account, follow these steps:

Types of Deposits under the Capital Gains Account Scheme

The taxpayer can choose the type of deposit considering criteria like liquidity, interest rate, restrictions on withdrawal, future plan for specified investment, etc.

Withdrawals from CGAS

The taxpayer can withdraw the funds without any restrictions from the Type A -Savings Deposit. However, in the case of pre-mature withdrawal of funds from Type B – Term Deposit, the account holder should pay a penalty. The taxpayer can withdraw funds using Form C for first withdrawal and Form D for subsequent withdrawals.

Once the taxpayer withdraws the funds, he/she must make the specified investment within 60 days. The unutilised amount should be deposited again to Savings Deposit.

Income Tax on Funds in CGAS

The taxpayer should deposit funds in the CGAS account before filing the Income Tax Return to avail the exemption under Capital Gains. Further, the taxpayer must retain the proof of deposit to submit to the Income Tax Department if asked for.

Interest on CGAS Deposit

The interest earned on Type A – Savings Deposit or Type B – Term Deposit is a taxable income under IFOS i.e. Income from Other Sources. It is taxable at slab rates. The bank may deduct TDS under Section 194A and issue a TDS Certificate i.e. Form 16A to the account holder. The taxpayer can claim the TDS credit in the Income Tax Return filed on the Income Tax Website.

Income Tax on Unutilised Deposit Amount

The taxpayer has a time limit of 60 days to invest the amount withdrawn from the CGAS deposit. If the taxpayer is unable to utilize the entire amount from the capital gain deposit scheme for specified investment to claim capital gains exemption, the unutilized amount is taxable in the Income Tax Return.

FAQs

How to make the payment for capital gains account scheme?

The payment for deposit in the Capital Gains Account Scheme shall be made either in cash or cheque or demand draft along with the application. Such deposit can be made either in lump-sum or in installments.

How do I withdraw money from capital gain scheme?

The amount deposited in the Capital Gains Account can be withdrawn by making an application in Form C. (Download Form C). The amount so withdrawn has to be utilized within 60 days from the date of such withdrawal and only for the purpose of such withdrawal. The unutilized amount should be re-deposited immediately.

How do I close a capital gain account after 3 years?

For closure, you need to fill form G. In case of closure of account due to death of the account holder, the legal heirs can claim the deposit through Form H. Lastly, if the amount not utilized remain in the Capital Gain Deposit Account Scheme even after a specified period of 2/3 years.

Got Questions? Ask Away!

  1. Hi Dixita

    If you are unable to utilize the sales consideration for purchase/construction of new property till the ITR filing due date, in such a case you can park your capital gains in the Capital Gains Deposit Account Scheme. You can claim exemption of the amount already spent on the construction/purchase of property and the amount deposited in CGAS.

    Keep in mind, if the amount deposited in the Capital Gains Account Scheme is not utilized within the time limit mentioned, then it shall be treated as income of the last year in which 3 years expire.

    Read more on Capital Gains Account Scheme here :slight_smile:

    The due date to file ITR for FY 2019-20 is extended to 31st December 2020, in case tax audit is not applicable.