Capital Gain Account Scheme (2024)

Government of India, Ministry of Finance, Department of Revenue (CBDT) in exercise of the powers conferred upon by Section 54 of the Income Tax Act, 1961 formulated a scheme called "The Capital Gains Account Scheme, 1988".

According to the provisions of Section 54 (F) of Income Tax Act,1961 w.e.f. 1.4.1988, an assessed earning long term capital gains on sale of any asset who desires to utilize the net consideration for purchase of residential house within two years (2 years) from the date of sale of the capital asset is exempt from tax on the capital gains provided he deposits the sales consideration in authorized branches of Banks authorized to receive deposits and maintain accounts. The amount deposited in the account is permitted for withdrawal for the purpose of purchase of house for self-residence of the depositor, within two years of receipt of sales consideration. If the amount is not utilized within a period of two years, the long term capital gain on sale of the capital asset shall be subject to tax in the year in which the long term capital gains were earned. For withdrawing money from this account after the period of -2- years is over without purchasing house for self-residence, the permission of Income Tax department is necessary.

All branches of public sector banks (except rural branches) are authorized to accept deposits under the scheme.

The scheme provides for two types of accounts viz.

• Account A which is in the form of "Savings Deposits".
• Account B which is in the nature of "TDR/STDR".

(In exceptional cases like customers belonging to Bora Muslim community, current account titled A-I can be opened instead of savings deposits).

• A resident individual in his own name.
• Non-individuals like Hindu Undivided Family (HUF), Sole Proprietorship firms; Partnership firms, Companies, Association of persons etc.

• Not exceeding 2 to 3 years from the date of transfer of original asset as given below:–
• Max 24 months - if capital gains is U/s 54, 54B, 54 F. (As declared in Form A by depositor)
• Max 36 months - if capital gains is U/s 54, 54 D, 5 4 F, 54 G & 54GB (As declared in Form A by depositor)

• The rate of interest is as per the rate advised by Bank for domestic term deposit from time to time.
• No additional interest is paid to Sr. Citizens & staff/ex-staff.
• The amount standing to the credit of the depositor in this account cannot be charged as security for loans/ guarantees or alienated in any manner, whatsoever.

• No penalty for premature payment will be levied in case of premature payment of deposits up to Rs 5 lacs provided it remained with the bank for a minimum period of 12 months
• Accepted as security by Government departments
• Accepted as margin for non-fund based activities
• Eligibility norms and all other instructions applicable to 'Fixed Deposits' will apply to these deposits

• First withdrawal from Account “A” can be allowed on application in Form 'C',accompanied by the relative pass book, subject to other provisions of the scheme.
• Such withdrawals will be recorded in the ledger and pass book, with suitable narrations followed by a noting "First W/D" in the 'Remarks' column.
• For subsequent withdrawals, Form D should also be submitted in duplicate stating therein the details regarding the manner and extent of utilisation of the immediate preceding withdrawal.
• One copy of Form D should be returned to the depositor duly authenticated. Submission of Form D should be noted in the ledger account.
• Where the amount of withdrawal exceeds Rs25,000/-, payment; should be made by way of crossed demand draft/ banker's; cheque only, in favour of the person, to whom the depositor; intends to make payment.
• Where withdrawal is sought from Account B, the depositor shall first apply for conversion to Account A as per the provisions of para (ii) and thereafter apply for withdrawal from Account A in accordance with para (iii) (a) to (e) above.
• Request of the depositor for withdrawal can be refused in the event of his failure to comply with all requirements as provided under the Scheme.
• Amounts withdrawn out of the deposits made in pursuance of sub-section (2) of Section 54, 54B, 54D o 54G and sub- section (4) of Section 54F, shall be utilised in whole or in part for the purposes specified in sub-section (1) of the relative section, within 60 days from the date of the withdrawal,failing which the whole amount or part thereof not so utilised shall be deposited back to Account A.
• The amount deposited in the account is permitted for withdrawal for the purpose of purchase of house for self-residence of the depositor, within 2 years of receipt of sales consideration.
• If the amount is not utilized within a period of 2 years the long term capital gain on sale of capital asset shall be subject to tax in the year in which the long term capital gains were earned.
• For withdrawing money from this account after the period of two years is over without purchasing house for self-residence, the permission of Income Tax department is necessary.

• A depositor desirous of closing his account(s) shall apply on Form G duly approved by the assessing officer, who has jurisdiction over the depositor along with the relative pass book and/or deposit receipts.
• The amount along with up-to-date accrued interest can be paid to the depositor by crediting such amount to any bank account of the depositor.
• In respect of a deposit account where a nomination is in force, the nominee, May, on the death of the depositor, apply for closure of the account in Form H duly approved by the assessing officer, who has jurisdiction over the deceased depositor along with the relative pass book and/or deposit receipt.
• The amount standing to the credit of the deceased depositor along with up-to-date interest can be paid by crediting such amount to any bank account of the nominee.
• Where no nomination is in force at the time of death of the depositor, the legal heir may claim the amount and receive the same in the manner stated in (3) (c) & (d) above.
• Where there are several legal heirs of the deceased depositor, the legal heir making the claim individually may do so by producing a letter of disclaimer or letter of authorisation from the other legal heirs in his favour.
• Payment made to the depositor/nominee/legal heir, as the case may be, in accordance with the provision of the scheme, shall constitute a full discharge to the deposit office of its liability in respect of the deposit.

• All forms mentioned above as required in the aforesaid scheme, should be obtained from the income tax department authorities.