What is Capital Gain Account Scheme?

A unique scheme The Capital Gain Account Scheme (CGAS Scheme), which was created many years ago, allows you to save on capital gains tax while also taking advantage of the benefits of long-term capital gains. You as well as HUF members are eligible to participate in the scheme. Let me tell you about the capital gain account scheme.

What is capital gain account scheme?

The profit made through the sale of a property, whether movable or immovable, is known as a capital gain. Regardless of whether they are long-term or short-term capital gains, they are subject to taxation. The capital gain accounts system (CGAS) helps you in avoiding capital gain tax liability on income obtained from the sale of residential property. To avoid paying tax, You must reinvest capital gains income within a set time period (maximum of 3 years) under Section 54 of the Income Tax Act.

Requirement for opening a CGAS account:

• A request in copy in Form A is required to start a capital gains account.

• PAN, proof of address, and a photograph would be essential documents.

• Cash, check, demand draught, and other methods of deposit are all acceptable. When depositing by check or DD, the date of deposit is the day the check or DD is received in the deposit office, subject to its realisation.

• You can pay the deposit in full or in instalments.

• You have to file different petitions for exemption under different provisions, as well as separate capital gains accounts.

How to open an account for the CGAS scheme?

You can open a capital gain account in any recognised bank recommended by the government, including the Central Bank of India, State Bank of India and its subsidiaries, Syndicate Bank, IDBI Bank, Bank of Baroda, and Corporation Bank. Rural banks do not offer the Capital Gains Account service. There are two types of capital gain accounts:

1) Savings Deposit

A savings deposit account is comparable to a standard savings bank account in that it pays interest at a rate similar to a savings bank account and provides you with a passbook. Type A accounts, like savings accounts, provide superior liquidity and allow withdrawals at any time.

2) Term deposit

Term deposit is comparable to a bank's fixed deposit account, except that it pays interest at the same rate as a term deposit and has the same restrictions. Type B accounts have a maximum term of three years. You must select a term based on your investment strategies, such as two years for new home purchases or three years for building. You will receive a deposit certificate with all of the deposit's data, which must be presented at the time of withdrawal, just like with fixed deposits. In addition, unlike a fixed deposit, term deposits cannot be automatically renewed.

I hope you understood the capital gain account scheme.