Capital Gains Account Scheme (CGAS)

Source: BL

Context:

• The Finance Ministry has authorised 19 private sector banks, including ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank, and Yes Bank, to accept deposits under the Capital Gains Account Scheme (CGAS).
• Previously, CGAS accounts could be opened only with public sector banks and IDBI Bank, except in rural areas.
• Rural branch restrictions continue: only urban and semi-urban branches can accept deposits.
  • Rural branch definition: centre with population < 10,000 (2011 census).

Key Changes

1. Section 54GA Addition
   • Allows capital gains arising from transfer of assets on shifting industrial undertakings from urban areas to SEZs to be deposited under CGAS.
2. Section 54 Background
   • Exempts Long Term Capital Gains (LTCG) tax on sale of plot or old house if proceeds are reinvested in a new house or specified assets:
     • One year before or within two years after sale for purchase
     • Within three years if building a new house

Capital Gains Account Scheme (CGAS)

• Launched by: Ministry of Finance, Government of India
• Objective: To allow taxpayers to deposit capital gains arising from the sale of assets when they cannot immediately invest in specified assets to claim exemption from capital gains tax under the Income Tax Act.
• Governing Law: Sections 54, 54B, 54D, 54EC, 54F, 54G, 54H of the Income Tax Act, 1961.

Types of CGAS Deposits

Deposit Account-A

• Savings deposit form
• Withdrawals: flexible, anytime by the depositor
• Interest: as per savings account rates

Deposit Account-B (Term Deposit)

• Fixed-term deposit (cumulative or non-cumulative)
• Withdrawals: only after maturity
• Deposits can be made: lump sum or instalments
• Submission aligned with Income Tax Return (ITR) filing deadline under section 139(1)

Capital Gain Term Deposit Account Features

• Minimum deposit: ₹1,000 (then in multiples of ₹1)
• No maximum limit
• Tenor:
  • Maximum: 2–3 years from date of asset transfer
  • Minimum: 7 days (maturity option) / 6 months (income option)
• Auto-closure at end of tenor
• Premature withdrawal penalty: 1% interest
• Restrictions:
  • No loans allowed against this deposit
  • Cannot be used as margin money or collateral for fund-based/non-fund based facilities