How to Open Capital Gains Account in India in 2022?

If a person is claiming capital gains exemption, he is required to deposit the money in the capital gains account before the due date of filing ITR. This article explains in detail about how to open a capital gains account, its tax benefits and features.

For example: Mr. A sold a residential property in January 2022 and he intends to claim capital gains exemption by purchasing a new residential house. to claim capital gains exemptionHe is required to buy a new residential house within 2 years i.e. before January 2024. However, the due date for filing ITR for the financial year 2021-22 is 31 July 2022 and the profit from sale of assets needs to be filed in the ITR.

In such cases, the government stipulates that the amount to be reinvested should be credited to the capital gains account before filing ITR. The seller is not required to credit the amount in Capital Gains Account immediately and he can do so any time before the due date of filing ITR i.e. before 31st July for non-audit cases and 30th September for audit cases. could.

By claiming this capital gains exemption, the taxpayer will be able to save 20% long term capital gains tax, which he will have to pay in case he does not intend to claim this exemption. (to quote: capital gains tax in india,

How to open Capital Gains Account?

A capital gains account can be opened under the provisions of the Capital Gains Account Scheme, 1988 and the amount of capital gains claimed as exemption as per the Capital Gains Account Scheme should be either reinvested or credited to capital gains. should be done. account before the due date of filing of return.

The government has notified 28 banks that can open capital gains account on behalf of the government. All branches of these 28 banks are authorized to open capital gains accounts except rural branches. Private banks like HDFC, ICICI etc. are not authorized to open capital gains account and this account cannot be opened online either.

For crediting the amount in capital gains account, the taxpayer has to first apply for account opening by applying in Form A (download Form A). He/she will also have to submit the following documents along with Form A – Proof of Address + Copy of PAN Card + Photograph. To be able to open a capital gains account you will need to personally visit the bank branch and submit the physical copy of the documents.

The amount deposited in the Capital Gains Account Scheme will be paid in the form of cash or check or demand draft along with the application. Such deposits can be made either in lump sum or in installments. It is not necessary that the entire amount should be deposited at the time of opening the account. A small amount can be deposited at the time of account opening and the balance can be deposited later.

If the deposit is being made by way of check or demand draft, the effective date of deposit for the purpose of claiming exemption shall be the date on which the check or draft is received in the deposit of the application, subject to the realization of the check or draft. office with.

A taxpayer desirous of availing benefits under more than one section of the Income-tax Act shall make separate applications for opening an account under different sections of the Income-tax Act in the same manner.

Capital gains account can be opened at any authorized branch across India and not necessarily in the same state where the property is sold.

Types of Capital Gains Account Scheme

There are 2 types of Capital Gains Account which are as follows:-

1. Capital Gains Account – Type A – Savings Account: It is like a normal savings account and the interest payable on this account is the same as the interest paid by that bank on a normal savings account. In case of Type A account, the deposit office will issue a passbook to the depositor in which all the amount of deposit, withdrawal, along with interest payable, will be recorded under the signature of the authorized officer of the bank.
2. Capital Gains Account -Type B – Fixed Deposit Account: It is like a fixed deposit in which the amount is deposited for a fixed period. The interest rate on this account is equal to the interest paid by the bank on fixed deposits. As Type B accounts are similar to Fixed Deposit accounts, any withdrawal from this type of account attracts penalty for premature withdrawal. In case of Type B account, the deposit office will issue a deposit receipt indicating the principal amount of the deposit, date of deposit, date of maturity of the deposit under the signature of the authorized officer of the bank.

Capital Gains Account Type A is advised when the capital gains amount is to be used for construction of the house as the amount will be required to be withdrawn at different stages. Type B fixed deposit account is recommended when the capital gains amount is to be used for buying a house.

Capital Gains Account Type B is also of 2 types- Cumulative and Non-Cumulative. Under Cumulative Option – Interest is reinvested and the total amount is paid at the time of completion of the tenure or at the time of withdrawal (whichever is earlier). Under the non-cumulative option, interest is paid at regular intervals and not reinvested.

Interest on Capital Gains Account Scheme

1. Interest at the rates specified by the Reserve Bank of India (RBI) from time to time shall be paid for each calendar month on the minimum balance between the end of the 10th day and the end of the month and shall be credited to the account at the end of each half year.
2. In case of cumulative deposits in Account B, the amount of interest earned will be treated as reinvestment and in case of non-cumulative deposits in Account B, the amount of interest payable will become due and payable at quarterly intervals.
3. In case of change of account or premature withdrawal or closure of account, the interest payable shall be the interest rate applicable for the period for which the amount was deposited, 1% less as penalty for premature withdrawal .
4. Interest earned on capital gains account will be taxed as per Income Tax Slab Rates,

Withdrawals from Capital Gains Account Scheme

amount deposited in capital gains account Can be withdrawn by making an application in Form C. The amount so withdrawn is to be utilized within 60 days from the date of such withdrawal and only for the purpose of such withdrawal. The unused amount should be re-deposited immediately.

For subsequent withdrawals, the application is required to be made in Form D with details of the manner/purpose for which the previous withdrawal has been utilised.

Many banks do not issue any check book for capital gains account and amount as the amount has to be withdrawn not by using check but by submitting an application in Form C/Form D.

No approval is required from Income Tax Department before withdrawing any amount from Capital Gains Account. Approval from Income Tax Department is required only at the time of account closure.

Transfer and Conversion of Capital Gains Account

1. A depositor can, if he so desires, apply for transfer of his capital gains account from one deposit office to another deposit office of the same bank.
2. A depositor, if he so desires, may also apply in Form B for transfer of a part or all of the funds from a Type A account to a Type B account and vice versa.
3. A depositor can also convert his entire Type A account to Type B account and vice versa.
4. If a request for transfer of amount from Type B to Type A and vice versa is received before the expiry of the specified period of deposit, such request will be treated as premature withdrawal of the amount.

Other Features of Capital Gains Account

1. only person and HUF Capital gains account opening is allowed.
2. The amount credited to Capital Gains Account cannot be offered as security for any loan/guarantee.
3. Interest on such account is not tax-free and TDS can also be deducted from such account as per the provisions of Income Tax Act. (Recommended Read: interest tax on fixed deposits, tax on interest on savings account,
4. The taxpayer can also appoint Nominees By applying in Form E to this account. Such nomination can also be changed by applying in Form F.
5. For closure of capital gains account, application has to be made in Form G. In case of death of the depositor, such application will be required to be made by the nominee/legal heirs in Form H.
6. acceptance of Income Tax Officer having jurisdiction over the depositor It is also required while applying for account closure.

If the amount credited to the capital gains account is not utilized for the specified purpose before the expiry of the specified time, the amount of capital gains not utilised, will be taxed as long-term capital gain. financial year in which the time period expires.

Unutilized deposits in Capital Gains Account Savings Scheme cannot be taxed in case of a person who dies before the expiry of the period of 2/3 years as prescribed under sections 54, 54B, 54D, 54F and 54G. deceased. This amount is also not taxable in the hands of legal heirs as the unutilized part of the deposit does not take the character of income in their hands but only a part of the property. (Circular No. 743, dated 06-05-1996)

E-Book on Capital Gains Tax on Sale of Real Estate Property

There are several clauses that govern the taxability of capital gains on the sale of real estate assets. In addition, there are certain exemptions that are allowed to be claimed and in some cases the amount is also required to be credited to the capital gains account.

To help people understand how to tax the sale of property, I have written a detailed book that explains how to levy capital gains tax on the sale of residential property in India with 40+ examples and case laws. The e-book can be purchased for Rs. 147 of these Contact,

topics covered
1. Computation of Capital Gains
2. Tax on sale of inherited property
3. Tax on sale of under construction property
4. Sale of property below circle rate/stamp valuation rate
5. Capital Gains Exemption on Sale of Property
6. TDS on sale of property
7. Over 40 Extensive Examples

Total number of eBooks sold so far: 10,000+

You can buy this e-book for Rs. You can also get exclusive access to 147 Through this link – E-Book on Capital Gains Tax on Sale of Real Estate Property in India.