This blog post explains about the capital gains account scheme and what is the purpose of this account. If you are aware of the long term capital gains, then you must learn about this account scheme to save the tax. This article will explain how to save the tax from the long term capital gains using this scheme. If you have any doubts please post it in the comments section. Subscribe to our future articles here.
What is Capital Gains Account Scheme?
Capital gains arise when some one sells land, house or any capital assets with profit. It is liable to pay the tax for all the long term capital gains. But, there is exemption on capital gains if the amount is spent for buying the new property or constructing new property within the specified time.
To avoid paying the capital gains tax, you must buy a new property within two years or construct new house within three years. For example, if you are selling a capital asset on October 2010, there will be capital gains in the profit arise from the sale. To avoid that, you must buy another property before October 2012 or construct new house before October 2013. Here the problem is that, you must file the IT returns before July 31st of every year. In the above case, you have show the capital gains and pay the tax if you are not invested in buying a new house or constructed one.
Read: Should I pay taxes for capital gains?
As I have describe above, to escape from the returns filing, you must create a new Capital Gains Account Scheme in any of the nationalized bank and deposit the amount. This amount must be used for buying the house or constructions before the stipulated time given by the Income Tax act. If you are not doing so, the amount deposited in the account will be subject to the capital gains tax.
Types of Capital Gains Account Scheme
There is two types of accounts under this scheme. One is deposit account A, which is savings account. Second one is term deposit account B which is term deposit account.
- In the first option, the amount withdrawn should be utilized for the purpose within sixty days of the withdrawal. Any un-utilized amount should be redeposited in Deposit Account A. In case the amount deposited is not utilized wholly or partly for the purchase or construction of the new property within the period specified, then the un-utilized amount will be charged as income of the previous year in which the period of three years from the date of the transfer of the original property expires. Interest rates will be give at the savings bank interest rates.
- In the second option, it is similar to the term deposits. It comes with cumulative and non-cumulative. The interest rates would at par with the other fixed deposits offered by the bank.
Important Points to Consider on Capital Gains Account
- The interest amount on this account is taxable.
- If you are selling the two different asset classes in different time, you need to open the two separate accounts.
- Using this deposit, you can not get any loans.
Summary
I hope this article is very useful for saving the tax on capital gains. I wrote this articles because many people not aware of this scheme. If you are not aware of the capital gains, please read our articles on Capital Gains Tax. Thank you for reading this article. If you have any doubts please post it in the comments section.
Subscribe to our future articles here.
November 22, 2009 at 5:45 am
Dear Sir,
I am going to buy one house plot in bangalore by getting Loan from LIC Housing. The EMI is Rs 10,000 How much Tax excemption can i get for this EMI
thank u
November 22, 2009 at 7:42 am
Hello Muruganansam,
Thank you for the comments.
Please read this article:
http://www.thinkplaninvest.com/2009/04/home-loans-and-income-tax-benefits-part-2-2/
Thanks,
Krishna
February 3, 2010 at 2:32 am
Sub : Clarifications regarding Re-investment under Capital Gains Scheme
Dear Sir ,
I had sold one property for 23 lacs on 29.1.2007 and deposited the entire proceeds
In a Public Sector Bank Under Capital Gains Scheme 1988 initially for a period of
2 years. In the Month of Feb 2008, I had purchased a ready built flat for Rs 9.80 lacs
and the balance amount continued to remain in the above said scheme which was
further extended by one year with the intention of purchasing a plot and getting it
constructed as admissible under the Rules.
Now if due to certain reasons one is not in a position to utilize the remaining amount
Within the stipulated period of 3 years , the balance amount remaining unutilized
And liable for tax under the Capital Gains.
Will you clarify the following point s:
1. Can the above unutilized amount can be invested in “ NHAI “ or “ REC” Bonds for a further period of 3 years or 7 years ?
2. What is the amount of tax to be paid under the Capital Gains for the above amount ?
3. Can the Capital Gain amout arrived after applying the Indexation Method be now reinvested or tax liability arrived on capital gains thus arrived at be discharged ?
I shall be higly grateful if you can kindly advise or guide in the above matter.
It maybe mentioned that the TDS on the Interest Portion Covered on Fixed
Deposit under the Capital Gains Scheme 1988 has been deducted by the bank or
Deposited by me in the respective financial years .
Thanking You ,
Sincerely Yours
M.N.Mehta
July 21, 2010 at 10:17 pm
should i deposite more amount after opening long term a/c by a fix amount.
September 20, 2010 at 2:16 am
Dear Sir,
Many thanks for your informative blog. I am in the process of selling my ancestral property. I will gain a good amount of money. I request you to enlighten me on :
1] Are only PSU banks offering opening of Capital Gains account?
2] Does the account offer interest and if yes at what %. If yes, can I use the interest account?
3] I am given to understand that with 3 years the amount has to invested in another property. Is this correct?
Thanking yo0u in anticipation and look forward to your supportive response
Best regards
Deep
October 7, 2010 at 10:56 pm
Hi,
I have invested Rs 5,00,000/- in capital gain saving account in December 2007. I had withdrawn Rs 2,50,000/- and paid to the builder for the purchase of anoher property. At that time, bank issued the demand draft without asking me to take permission from IT department. Now I want to close the account for paying balance amount to the builder. Is it mandatory to take permission from IT department to do so? Can bank refuse to issue demand draft/ cheque without IT’s approval? If so, please let me know the Clause of IT, under which permission should be taken/ not required.
Thanks
December 13, 2010 at 6:23 am
hi,
pls assist me in following query
1. i had capital gain of rs. 500000/- in FY 07-08 n entire amt i deposited in capital gain account scheme and avail exemption u/s 54F
but i purchased property after 2.5 years i.e. after 2 years as stated in act.
2. so can this exemption continue or i need to offer this amt for tax.
3. is there any extension for capital gain scheme
pls suggest ASAP
Thanks
December 14, 2010 at 3:14 am
Whether the unutilised amount in Capital gain deposit scheme us54F(4) is taxable even a new asset as
An Assessee has sold a Land on 10022006 and earned Long term capial gain of Rs.8,14,000-.He deposited 61% of the net consideration of Rs.14,45,000-in Capital gain deposit scheme as per sec.54F(4)in a Bank before the due date of filing the return for the asst.year 2006-07.He purchased a residential property on 18/02/2008.He paid an advance of Rs.7,00,000- on 02/02/2008. The fact is Assessee has not withdrawn any amount from the amount deposited in Capital gain deposit scheme. 1.Now what is the tax effect in this case to the assessee?. 2.Whether the advance paid before the end of two years from the date of sale can be considered as partly utilisation for the purchase of New asset us54F(1)? 3.Discuss the case Us 54F(4)(i)
December 18, 2010 at 5:07 am
Hi,
I have invested Rs 15,00,000/- in capital gain saving account in December 2010. I had withdrawn Rs 12,50,000/- and paid to the seller for the purchase of anoher property. At that time, bank issued the demand draft without asking me to take permission from IT department. Now I want to close the account for paying balance amount to the seller. Is it mandatory to take permission from IT department to do so? Can bank refuse to issue demand draft/ cheque without IT’s approval? If so, please let me know the Clause of IT, under which permission should be taken/ not required.
Thanks
March 16, 2011 at 1:37 am
mujhe capital gain me rupees invest karna hai allahabad bank ne mujhe kaha main usake yaha capital gain a/c open kar ke fix deposit kara du i.t us capital gain tax exemption (sec. 54eb)
kya is sec ke tahat exemption mujhe milega
ya main 54EC me rec,nhai bond me invest karu mere paas time kafi kam hai meri agricalture land thi jise maine sale kiya aur mujhe future me koi property bhi nahi buy karani hai usake liye fixed deposit ya bond sahi rahega
so plz help me kya ye sec se exemption it me mujhe milega
plz reply
March 30, 2011 at 8:11 am
if the amount deposited in capital gains scheme `1988 is not utilised even after maturity of the deposit is it exempt from capital gains
March 30, 2011 at 8:14 am
is deposit free from capital gains if kept in the capital gains scheme 1988 for three years and not utilised for property purchased construction etc
May 24, 2011 at 10:26 am
can my mother open capital gain account in joint name with me as either or survivor.Can I buy a property out of this money.
May 27, 2011 at 4:34 am
I recently sold my land for 80L i want to know if i can register 2 properties with the money i got from it or am i allowed to buy only 1 property and register
June 13, 2011 at 10:06 am
Sir,
I had purchased a land at Rs. 10000/= in the yr.1983 and now sold at Rs. 250000/=. I like to keep the money under capital gain schemes for 2/3 years as admissible. kindly let me know the followings.
1.Through which bank at Agartala I can keep the money under that scheme and name of the available schemes now.
2. Minimum period of the sch. that I have to keep the money and what will the interest rate.
3. Name of the bank available at AGARTALA, TRIPURA- dealing the scheme.
June 28, 2011 at 6:59 am
I want to know is it possible if I sale my residential property & purchase one commercial property from the same amount which i received from my residential sale ( its already more than 3 years old property ) ,so can i get exemption from capital gain .
July 4, 2011 at 9:05 pm
I bought a flat from a builder in Feb 2006 for 19.5 lakhs and the full payment(loan disbursement) was completed in Sep 2006 and i have been paying EMI ever since. The flat was registered in my name in the same month
The builder did not deliver the flat on time and I approached the consumer forumn. After 5 yrs, of legal hardship, I am now reselling my flat to the builder through court for a settlement amount of 29 lakhs
If you take into account the EMI paid over the last 5 years, loan opening and closing charges, legal charges etc. There would be no profit.
However, how does Income Tax dept consider this. Am I liable to pay capital gain tax over the difference of 29 lakh – 19.5 lakh? can i deduct the emi and other expenses in cost fo acquisition?
Further, as I have not received any possession letter from builder, is the sale consideration eligible for short term gain/loss or long term capital gain/loss?
July 4, 2011 at 10:39 pm
Dear Sir,
I have sold a flat in the month of November 2010, for Rs 22.50 lacs kept the total amount in State Bank of India Capital gains account “A”.I want to purchase a new flat against the amount deposited in near future for which I am searching a suitable one .
MY question is 1) if in the two year period I don’t get a suitable flat what will be the tax implication than ??
2) The amount of sale proceeds received from the sale as mentioned above is Rs 22.50 lacs but actual capital gains is around Rs 6 lacs can I take the balance amount ( Rs 22.50 lacs-6lacs=Rs 16.50 ) from the capital gain account when I require it ?
I will be be highly obliged for your quick reply .
Thanks
Amit Kumar Roy
Mob no. 09903807419
July 7, 2011 at 1:30 am
Sub : Guidance regarding investment under Capital Gains Scheme
Dear Sir ,
I had sold one property for 180 lacs on 29.6.2011,now the purchaser of my property is paying the consideration in parts which i m depositing in my Savings Account.I am planning to buy a Residential House Property within 2 years.I came to know about the Capital Gain Depository Account Scheme.I and My mother is the joint owner of the property.
Will you clarify the following point s:
1. Can my mother open capital gain account in joint name with me? .
2. Can i deposit more amount after opening Capital gain Account as bcoz i m receiving the consideration in parts?
3. Is CGDA gives interest on deposits?At what rate?
4. Can the above amount can be invested in “ NHAI “ or “ REC” Bonds for a further period of 3 years or 7 years,which i m gonna purchase witihin 6 months ?
5. Buyer has not paid the amount in full yet and the sale deed shall be executed after i get the full amount of consideration, so in this circumstances what is the time period i.e. 6 months for purchase of NHAI bond ?
I shall be higly grateful if you can kindly advise or guide in the above matter.
It maybe mentioned that the TDS on the Interest Portion Covered on Fixed Deposit under the Capital Gains Scheme 1988 has been deducted by the bank or Deposited by me in the respective financial years .plz inform me at the earliest.
Thanking You ,
Sincerely Yours
JAY KISHAN SHARMA
July 8, 2011 at 12:11 am
To save the Long Term Capital Gain Tax, my client has invested the whole of the LTCG amount in Type B Term Deposit Account with SBI. Now, in the next financial year he has booked another house property and paid the booking amounts from his personal savings and now he wants to pre-mature the said Type B Term Deposit to pay the balance amount to the builder. But the Branch Manager demands the consent letter of the ITO in this regard to pre-mature the TDR.
Question : My question is that whether this permission is actually required in my case?
Next question: Can I make the balance payment to the builder from my other income sources / arrangements and savings? If yes, then the unutilised part of the Type B Depsosit amount at the end of three years would be treated as Capital Gain Amount or not?
Thanks
July 8, 2011 at 3:56 am
Hello MANISH AGARWAL,
If you have not utilized the amount deposited in the account on period, you have to pay the capital gains tax.
Also, ask the details to bank why they need that letter. Also, there are definitions on asset class. If both the properties are different asset class, you can use the amount.
Thanks,
Krishna
July 17, 2011 at 7:45 am
I have a residential land and I would like to sell the same. What are the options for me to save the capital gains tax. The land was purchased in August 2001 and may sell it in August 2011.Thanks for the help
July 22, 2011 at 7:24 am
I have a capital gain account with SBI ( 31 lacs) and has now 3 years are over. I had paid taxes on intrest accrued in respective years and now want to close the account. i had approached my assessing officer in ITO to sign on form G , but he refused asking for clearing the taxes first.
Even my request to get the taxes deducted from the capital gain amount / intrest accrued on which i had paid timely taxes were not allowed by bank / asesing officer. It seems that they are themselves not very clear and are playing safe.
Also my request to get the intrest accrued transferred to my personal saving bank account was refused by bank even though RBI capital scheme 1988 has provision of intrest repayment on quaterly basis.
How i am supposed to pay such huge amount as taxes from my personal saving? It means i will not be able to get my money back and will be expected to pay further taxes every year. Pl. help me by explaining what the law says. Also suggest a way out of this situation.
Rupesh Gupta
July 26, 2011 at 2:17 am
I have earned Rs 42 lacs as considerationfor sale of my flat.
Out of this Rs 27 lac happens to be the capital gain
If I deposit the entire 42 lacs in Capital Gain Scheme B, after utilising the gain amount, can I reinvest the non-gain amount elsewhere ? or it gets locked ?
August 4, 2011 at 12:03 am
if the property which is sold is in two joint names, will the capital gain account be in joint names? or can be in any of the name?
August 7, 2011 at 4:38 am
Sir
460 sq.yds of commercial site (purchased in 1957 for Rs.10,000/-)
with a tiled roofing house ( constructed in 1975of Rs. 90,000/- )of my mother (passed away in 2004) sold in Feb 2011 for Rs. 30 lakhs as against registration value of Rs. 90 lakhs. Pls advs how much
LTCG Tax is to be paid. Also request you to indicate the methods
for saving LTCG Tax.
Regards
August 21, 2011 at 2:11 am
Hi All,
Have a query regarding withdrawal of Capital Gains fixed deposit(FD). Hope I will get relevant information. My father sold a property an year back and the amount was deposited as Capital gains FD in one of Nationalized banks. The FD is an joint account with mine and father’s name. Unfortunately, my father expired 8 months back. And we dropped the plan of constructing house due to unavoidable circumstances. Now, I want to withdraw the FD. Could someone guide what can be done to withdraw the amount without being liable to pay tax.
September 19, 2011 at 6:36 am
can the interest earned on capital gain fd be used for other purposes after paying tax ?
September 19, 2011 at 11:53 pm
hello,
my father seold his house for 45 lacs and has invested entire amound in capital gains deposit scheme in a bank as fd . LTCG is 15 lacs . how much money is to be invested in capital gains account scheme 45 lacs or 15 lacs ? within how much period is to be invested in another house ?
please reply asap . thanks so much.
September 23, 2011 at 7:03 am
I have sold a property for Rs.95 lacs. Consideration is to be recieved in two trenches. First 50 lacs during current year and balance Rs.45 lacs in next FY. I understand there is cap limit of Rs.50 lacs under capital gain tax scheme. My CA has suggested I can claim capital gain exemption for the full amount of Rs.95 lacs if I invest Rs. 50 lacs under the scheme in current year and the rest next year. As per his opinion deposit cap is for a particular FY.
December 2, 2011 at 5:45 am
How long do I need to invest the money in a capital bond before taking it out?
December 12, 2011 at 2:42 am
My wife is selling a plot of land and the capital gains is about 2.2 cr. She is allowed to invest the same amount in another property to avoid capital gains tax. Can she invest in two different properties total of which is 2.2 cr or does it have to be only one property whose value is 2.2 cr?
Thanks. Regards
December 14, 2011 at 1:43 am
If I hv sold a property and deposited the gains in a normal savings account not mentioning it for capital gain account but I have used the whole gain for purchase and construction of a house. Will I be eligible For exemption under section 54 or not be given the exemption for depositing it in a normal savings account and not mentioning it is for capital gian account. Plz let me know the same along wit a case if any. And also any alternative if not allowed the exemption. Thank you
January 9, 2012 at 1:21 am
Sir,
One of my client has deposited an amount of Rs.10 lac on 6.4.2011 to get the benefit of section 54. Now he wants to buy a residential house by withdrawing the amount from bank. The branch manager has stated that the amount can not be withdrawn before the lock in period of 3 years. Now let me know the procedure of getting the amount back which can be utilised to purchase the residential house.
Is it necessary for the seller to have necessary IT return documents?
January 20, 2012 at 8:14 pm
Sir,
Sale of Agriculture land(in city) is come under capital gains. But how to escape from the returns filing. I never to do IT returns.
January 30, 2012 at 7:39 am
I sold one plot in Sept.2011 for 40 lakhs.Then I purchased a Flat in Pune.Can I close my Cap.Gain Ac.now ?
January 31, 2012 at 12:23 am
I have few questions to ask:
1. I invest in shares through reliance money Demat a/c. My short term gains are around 5000 rs per year. Is there any need to pay tax for it? I am already a tax giving person but I don’t include them in my yearly income, should I include them ? I dont know whether Reliancemoney deducts TDS on trading of shares?
2. If i withdraw money from Demat a/c through my wife’s(housewife) bank a/c then will the amount taxable for me?
3. Can i use my Demat a/c for investing from my wife bank a/c?
January 31, 2012 at 11:49 pm
I have sold a residential property in august 2011. till what time (LATEST) can I deposit the capital gains in the Capital Gains Account ?
February 6, 2012 at 3:56 am
land is sold one year ago but consideration is received after 9 months and so we have not open capital gain account in nationalized bank within 6 months . can exemption under sec 54f be availed or we have to pay tax
March 2, 2012 at 12:36 am
Dear sir,
Some of my client has deposited at an amount Rs- 2 lac in post office in fixed deposit scime but he need the deposited money at a time within preemature . He also meet the post master janeral but he refused to draw the amount befour the maturity of amount.
So in this case, as per the rule of post office by deducting 1% out of the final amount cane he get? He has a savings announts.
if he get so plese give me the solution.
plese ge me the actual solution in supporting my client can withdraw the amount as soon as possible.
regds
Papay
March 2, 2012 at 8:03 am
Sir,
Against Long term capital gain for AY 10-11 sale deed dt. 1.03.2010, I have invested amount of Rs. 170000/- in account B ( FD). I have also Account A.
During FY 11-12, I wish to withdraw Rs. 70000/- for personal use not for House construction or purchase.
And in subsequent year I wish to withdraw Rs. 100000/- and close the accounts.
Under the circumstances in which year I have to add back the amount of withdrawal to my income as LTCG and how much is to be added?
Is there any requirment to obtain permission from Income Tax Dept. to withdraw the amount from this account. If any, which form is to be used?
Kindly advice.
March 12, 2012 at 2:15 am
If I sell my flat in Apr 2012 for 40L, how many months time do I have to deposit this money in the new Capital Gain Acc ?
I have started construction of a new house & will need money at hand for next 6 months. is it ok to deposit this money in normal Savings Acc then ?
Who will catch me when & how ?
March 12, 2012 at 3:03 am
HI Abhijeet,
If you are selliing At April 2012, you have to buy a new property before April 2014 or construct a house before April 2015. Till that time you can keep the money in the account.
In the article I have mentined that you can deposint in two options (Savings Bank or Fixed Deposit). Please read it. When ever you need money, you can withdraw and use the money.
Thanks,
Krishna
March 12, 2012 at 7:44 am
Hello Krishna,
1. The concept of 2 yrs to buy a new flat & 3 yrs to construct a new house is clear.
2. The SB & FD kind of accs under Capital Gain Acc is also clear.
My Q was — what if I deposit these 40L in my normal SB acc that I already have with HDFC or SBI & utilise it within next 6 – 12 months? Not open any new Acc under Capital Gain Acc Scheme ?
March 12, 2012 at 8:14 am
Hello Abhijeet,
No. You have to open the Capital Gains Account Scheme. You can get more details from the bankers. Also note that you are required to put only the gains, not all the amount. For example, you have sold for 40 lacs, you have to find out the capital gains and then plan for the savings.
Are you clear now?
Thanks,
Krishna
March 12, 2012 at 11:30 pm
Hello Krishna,
Thanks a lot have better understanding now
. Will follow up with some CA & identify the Capital Gain as you mentioned & then check with the Banks as well for the same.
BR,
-Abhijeet
March 13, 2012 at 1:19 am
Hello Abhijeet,
Thank you for the time.
If you have any other doubts, please keep it posted in the comments section.
- krishna
March 29, 2012 at 5:07 am
Can a deposit holder avail loan against capital gain deposit receipt from bank ?
April 4, 2012 at 10:11 am
I have sold my old house and received the payment on 1.4.2012 which is in my Saving Bank account, please advise me that up to how much time I will have to open a Capital Gain Account;
VIMAL KUMAR JAIN
e-mail : jain56vimal@yahoo.com
April 4, 2012 at 10:13 am
vimal kumar jain Says: Your comment is awaiting moderation.
April 4, 2012 at 10:11 am
I have sold my old house and received the payment on 1.4.2012 which is in my Saving Bank account, please advise me that up to how much time I will have to open a Capital Gain Account;
VIMAL KUMAR JAIN
e-mail : jain56vimal@yahoo.com
April 16, 2012 at 7:33 am
As per the Income Tax Act, capital gains tax can be avoided by constructing new house within three years.
My question is construction of house means purchase of plot and start construction? or just the construction of house by buying the plot on loan or with the investment amount available on selling the old flat?
I am confused. Please reply.
April 22, 2012 at 10:29 pm
hello sir, my question is can we utilize the amount in the capital gain account for purchasing a “site” and not a building, and is this valid to avoid the tax? please do reply.