Capital Gain Deposit Scheme Account

Capital Gain Deposit Scheme Account

1. What is Capital Gain deposit Scheme?
2. Can I do Fixed Deposit (FD) in Capital Gain Deposit Scheme Account?
3. How can I close the Capital Gain Deposit Scheme Account?
4. What will happen if I am not able to utilize full amount deposited in capital gain Account?
5. How I can withdraw unutilized amount from capital gain account or can close the capital gain account in event of death of depositor?

1.  What is Capital Gain deposit Scheme?

Under section 54 to 54G, the time to reinvest is 2 years post transfer for purchase or 3 years post transfer for construction has been given, and the assessee may not be able to reinvest the amount in a residential property till the date of income tax return filing due to various reason like not able to find suitable property to buy, not able to arrange balance funds etc., then Govt. has introduced a special deposit account for that capital gain / sale  proceeds to deposit on or before due date of filing of return of income, that account is called “Capital Gain Deposit Scheme Account”.

This account is mostly in major nationalized banks. There are some specified forms for withdrawal & closure of capital gain deposit scheme.

Also the important point is that amount deposited in the  “Capital Gain Deposit Scheme” can be utilized only for the purpose of reinvestment in the specified investment as per claimed section of capital gain for exemption, within the specified time limit of that investment. If any amount is left unutilized into that account for a specified investment in a specified period, the relative capital gain would be taxable in the year in which the time limit to utilize it ends.

2. Can I do Fixed Deposit (FD) in Capital Gain Deposit Scheme Account?

Yes, you can do FD in Capital Gain Deposit Scheme Account. In Capital Gain Account, there are two types of accounts:-

1. Type A Saving Account

Type A Account of Capital Gain Scheme is like a saving bank, where the accountholder will get a passbook & where a nominal interest like saving bank account is credited in a particular period. It is a free hand account just like saving bank, where balance is always available for withdrawal. But we can withdraw the first withdrawal by form C and the subsequent withdrawal can be done through Form D.

2. Type B Deposit Account

Deposit Account is like FD account where the amount is transferred to a term deposit account which bears interest rates similar to the prevailing FD rates for the given tenure. The maximum tenure for FD in Capital Gain Account can be chosen as 3 years.

For withdrawing money from Type B Account, depositor have to first transfer the funds from Type-B Account to Type-A Account through form B. And from Type A account he can withdraw funds initially through form C and thereafter through form D.

3.  How can I close the Capital Gain Deposit Scheme Account?

Since the amount in capital gain account is the exempted amount for specified purpose. So any unutilized amount is taxable as long term capital gain. So for that we cannot directly close this account.

For closure of Type A & Type B account of Capital Gain Scheme, we need approval of jurisdictional income tax officer. For approval we need to submit copy of passbook for Type A Account & copy of Deposit receipts for Type B Account to the income tax officer of our jurisdiction.

Once we get the approval, we need to submit to bank copy of approval along with Form G , passbook of Account Type A & deposit receipts of Type B, to the bank for closing the Capital Gain Deposit Account.

After above procedure, bank will close the capital gain account and credit any unutilized amount along with due interest if any to any normal bank account as given by the assessee.

4. What will happen if I am not able to utilize full amount deposited in capital gain Account?

If you are not able to utilize the full amount deposited in capital gain account, it would be taxable as long-term capital gain in the year in which the period of 2 year or 3 years allowed for post-acquisition is completed.  

5. How I can withdraw unutilized amount from capital gain account or can close the capital gain account in event of death of depositor?

In case of death of depositor of capital gain account gain account can be closed as per below procedure:

1. 1. The prior approval from jurisdictional income tax officer should be taken by legal heirs or nominee by submitting copy of passbook for Account Type A & copy of deposit receipts for Account type B. The Assessing Officer will obtain & verify the copy of succession certificate/ will / power of attorney etc.
   2. In case where nomination was done in the account, nominee will file account closure application in form H along with passbook of Account A or deposit receipt of Account B.
   3. In case where nomination is not done, legal heir will file closure application in form H along with passbook of Account A or deposit receipt of Account B.
   4. Upon satisfaction of all the approvals & documents, bank will close the capital gain account & transfer the balance amount into the given bank account of nominee / legal heirs.