As the due date of filing ITR is approaching near, we encounter varied queries on diverse topics. Its always interest for us to research on complex topics and matters; however we always make an attempt to enlighten all our newsletter recipients on matter of general interest.
One such matter which has gained importance in the recent year due to the real estate boom is Capital gains and its consequent tax minimization.
A person who is liable to pay tax on the capital gain due to sale of some capital asset can claim exemption from tax, if he invests in buying or constructing a new property or agricultural land within a specified time. However if he wishes to invest but has not been able to find a suitable deal he can deposit the amount in a special account known as Capital Gains deposit Accounts scheme of a bank before the due date of filing his return of income.
In our today’s newsletter, we shall briefly touch upon three topics related to capital gain account scheme.
- Calculation of Amount required to be deposited under capital gain account scheme
- Due date to deposit the unutilised amount in capital gain account scheme
- Period in which amount to be utilised
- Brief features of the Capital gain account Scheme
- What amount is required to be deposited under CAGS:
Benefit of Capital gain scheme can be availed under Sec 54, 54B, 54D, 54G , 54GA 54F. To avail full capital gain exemption un-utilised amount as calculating below, is to be deposited in capital gain account scheme.
There is general confusion as to which amount is required to be deposited under capital gain account scheme. So the same has been defined under following two heads .
- To avail benefit under Sec54, 54B, 54D, 54G , 54GA – Amount of Capital gain minus amount utilised to purchase/construct new asset = Amount required to be deposited in capital gain account scheme.
- To avail benefit under Sec 54F – Net sale proceed of long term capital asset sold minus amount utilised = Amount required to be deposited in capital gain account scheme.
- Due date to deposit the unutilised amount in capital gain account scheme:
Unutilised amount as calculated above should be deposited in capital gain account scheme before due date of filing of Income tax return .
Example: Suppose in above case, a capital asset was sold on 15.04.2014 and the assessee is salaried individual. The due date of income tax return is 31.08.2015, So the assesee should deposit unutilised amount before 31.08.2015.
Thus, If you have sold any capital asset during financial year 2014-15 and want to avail the benefit of under Sec 54 , 54B, 54D, 54G , 54GA, 54F, then act fast and deposit the balance amount in capital gain account scheme.
- Period in which amount to be utilized:
Amount deposited in to capital gain account scheme must be utilised as per condition and purpose as explained in respective section under which deduction has been claimed by the assessee. For Sec 54/54F period is as under.
- Within 2 years from transfer of asset in case of purchase of new house
- Within 3 years from transfer of asset in case of construction of new house.
Amount not utilised within the above time limit shall be Taxable as long term capital gain in the financial year in which the period of 3 years from the date of transfer of Original Asset expire.
- Brief features of the Capital gain account scheme:
This scheme is available in all the major banks so inquire about the scheme from your nearest branch.
- There will be two types of deposit accounts:
- A- This account will be in the form of Saving Account.
- B- This account will be the form of Term Deposit Account (cumulative as well as non cumulative).
The deposits may be made under the provisions of Sections 54, 54B, 54D, 54F or 54G ,54GA by any depositor intending to avail benefit under the said section or sections of the Act.
- Transfer of the Account – Both the accounts, i.e., Account-A and Account-B can be transferred from one deposit office to another deposit office of the same Bank.
- Premature withdrawal is permitted before expiry of the period for which deposit was made; rate of interest on such deposits shall be as applicable to period for which deposit remained with deposit office, as a penalty for premature withdrawal.
- Withdrawal from the account:
Depositor having Account-A, at any time after making initial deposit, can apply on Form ‘C’ with Passbook for withdrawal of amount.
Depositor intending to make withdrawal from his Account-B shall fit get his account transferred in his account-A.
Limit on withdrawal amount – Withdrawal for more than Rs. 25,000/-, will be allowed through crossed demand draft.
The Bank will deduct tax on interest as per income tax provisions and issue TDS Certificate for the tax deducted.
- Utilization of amount of withdrawal: At the time of any withdrawal from Account-A other then the initial withdrawal, depositor shall furnish in Form ‘D’, in duplicate, the details regarding manner and extent of utilization of amount of immediately preceding withdrawal.
- Change or alienation: Amount standing to the credit of the depositor in any account under the Scheme shall not be offered as security for any loan or guarantee and shall not be charged or alienated in any manner, whatsoever.
- Closure of account
- By depositor: If a depositor desires to close his account, he shall have to apply to deposit office on Form ‘G’ along with the approval of the Assessing Officer with the Pass Book/Deposit Receipt. Deposit office shall pay the amount of balance including interest accrued to depositor.
- By nominee: Seek the approval of the assessing officer in Form H who has jurisdiction over deceased depositor and submit to bank.
- By legal heir: Seek the approval of the assessing officer in Form H who has jurisdiction over deceased depositor and submit to bank and also submit the disclaimer by other heirs. Remember however, if there is more than one heir, the assessing officer will give approval only after getting the a succession certificate or a probate of a will or a letter of administration to the estate of the deceased.