Indian Income Tax Capital Gain Account Scheme tax saving benefits, use, applicability, Bank Account Type & account opening process, IT S. 54(B, D, F & G) and list of authorized Public Sector Banks for deposit.
Use of Capital Gain Scheme arises when individual wants to buy a residential property within 2 years from the date of sale, or Construct a residential property within 3 years from the date of sale.
So to safe guard the interest of revenue and also giving the opportunity to Individual/ HUF tax payers, Government of India introduced the Capital Gain Scheme in 1988. In this Scheme, Person can open the Capital Gain Saving Account with Public Sector Bank and deposit the amount equals to capital gain which remain unused towards the purchase of another property within one year from the date of transfer of the original property, or that is not used by him for the purchase or construction of a new property before the date of furnishing the return of income. The deposits may be made in one lump sum or in installments at any time. The amount should be deposited before the due date for filing income tax returns.
Eligible Person for Capital Gain Scheme: Individuals and Hindu Undivided Family can apply for capital gain scheme account having capital gain planning to buying a residential property or wants to construct a residential property in 3 years time, so to save Income tax on long term capital gain they can deposit the amount in Public Sector Bank specified capital gain scheme account.
Income Tax Section under which Capital Gain Scheme is applicable: As per Income Tax Act, 1961 u/s 54, 54B, 54D, 54F and 54G you can claim benefit of scheme.
- Exemptions from capital gains on transfer of residential house/property u/s 54 of Income Tax Act, 1961
- Exemption of Capital gain transfer of land used by an individual or his parents for agricultural purposes u/s 54B of Income Tax Act,1961
- Capital Gain on Compulsory Acquisition of Land and Building of an Industrial Undertaking u/s 54D of the Income Tax Act, 1961
- Exemption from Capital Gain u/s 54F of Income Tax Act, 1961
- Capital Gain on Transfer of Capital assets in Case of Shifting of Industrial Undertaking from Urban Area u/s 54G
Example, if a person derives long-term capital gain on April 10, 2013, in that event he must make the investment in acquiring new residential property within two years from the date of sale or when the said property is proposed to be constructed then within three years from the date of sale.
However, there is also a condition that if the tax payer is not able to buy or construct the said property by the last date of filing the income tax return, in that event the amount has to be deposited in the Capital Gains Accounts Scheme. For example , as mentioned above, if the property is sold on April 10, 2013, the tax payers can buy or construct the property by July 31, 2014, which happens to be the last date of filing the income tax return.
In a situation where such purchase or construction is not completed by July 31, 2014 in that event the money must be deposited on or before July 31, 2014, that is, the last date of filing the income tax return in terms of the Capital Gains Accounts Scheme.
How to Open Capital Gain Scheme Account
OPENING OF ACCOUNTS: Accounts under the Scheme can be opened only at Semi-Urban / Urban / Metropolitan Branches. Two types of deposit accounts can be opened under this Scheme
Type of Accounts : There are two type of Account Saving Account and Fixed Deposit Account
DEPOSIT ‘A’ : The deposits made under this account shall be in the form of Savings Bank Deposits
DEPOSIT ‘B’: Deposit made under this account will be in the form of Term Deposits, with an option to retain the deposit either as “cumulative” i.e. similar to our DRC Deposit [with interest reinvested] or as non-cumulative i.e. similar to our Fixed Deposit. Such deposits may be made as a single lump sum amount or in installments at any time on or before furnishing the Income Tax Return.
How to make WITHDRAWALS capital gain scheme account : Withdrawals under Deposit Account – A can be made from time to time by the depositor, subject to prevailing terms and other provisions of the Scheme, by submitting the requisite form. Withdrawals under Deposit Account – B can be made after the expiry of the deposit period.
List of Banks who can Accept Deposit – The account under Capital Gains Accounts Scheme cannot be opened in all the branches and with all the banks. The government has identified the following 28 banks to accept the deposit under Capital Gains Accounts Scheme 1988. These banks are: State Bank of India and its subsidiaries like State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Indore, State Bank of Mysore, State Bank of Patiala, State Bank of Saurashtra, State Bank of Travancore, Other Public Sector Banks are Central Bank of India, Bank of India, Punjab National Bank, Bank of Baroda, UCO Bank, Canara Bank, United Bank of India, Dena Bank, Syndicate Bank, Union Bank of India, Allahabad Bank, Indian Bank, Bank of Maharashtra , Indian Overseas Bank, Andhra Bank, Corporation Bank, New Bank of India, Oriental Bank of Commerce, Punjab & Sind Bank & Vijaya Bank. All branches of these banks except the rural branches are authorized to receive the deposit and maintain account under Capital Gains Accounts Scheme, 1988.