The Finance Ministry has overhauled the Capital Gains Account Scheme by allowing most private banks to offer the facility, recognising new-age payment modes and expanding the definition of proceeds to be deposited, among others.
New Changes have been made effective from November 19.
The Ministry has issued two notifications. One relates to the inclusion of 19 private banks, comprising ICICI Bank and HDFC Bank, and others to provide a deposit scheme, while another notification concerns new provisions regarding payment instruments and a new source of proceeds. The Income Tax Act provides a mechanism to avail of an exemption from Long-Term Capital Gains Tax (LTCG) on the sale of Capital Assets by reinvesting the proceeds within a specified time period.
The Capital Gains Account Scheme, introduced in 1988, facilitates parking the proceeds in a bank account for a period between the realisation of the gain and reinvestment. Investing the gains in this account is treated the same as direct reinvestment for exemption purposes. However, short-term capital gains are not eligible for the capital gains account scheme (CGAS), as exemptions under Sections 54 to 54GB of the Income Tax Act apply only to long-term capital gains.
Streamlined process
Talking about new changes, Amit Maheshwari, Tax Partner at AKM Global, said that the scheme covers Section 54GA of the Income Tax Act as well now, which is for an industrial undertaking transferring from an urban area to SEZ, wherein all electronic payments such as UPI, IMPS, NEFT, and credit cards are recognised for making deposits. “From April 1 2027, closures of CGAS accounts will move to a completely electronic system with digital signatures or EVC. Overall, these changes will facilitate a shift from a paper-driven, cheque-based process to a streamlined, technology-enabled framework for availing capital gains exemption,” he said.
According to Lakshmi Sankar, Executive Director at Nangia Group, the clarification on the effective date of payment where a deposit is made through cheque, demand draft, or electronic mode, which is the date the deposit office receives the payment, subject to the cheque/draft/e-payment being successfully realised, is a welcome move.
“Electronic statement of account now holds significance similar to a pass book. Form 15G & Form 15H can also be furnished electronically for lesser/nil deduction of TDS on the interest portion of the deposit made,” he said.
Deposit account info
Under the scheme, there are two types of deposit accounts, namely Deposit account-A; and Deposit account-B. The deposit made under account-A will be in the form of a savings deposit, and withdrawals under this account can be made from time to time by the depositor. Interest rate, as applicable, on Saving Accounts will be credited to such accounts.
The deposit made under account-B shall be in the form of a term deposit, with the option for the depositor to keep the deposit as a cumulative or non-cumulative deposit. Withdrawals under this account can be made only after the expiry of the period for which the deposit under this account has been made and accepted.
The account can be opened with a minimum deposit of ?1,000 and thereafter in multiples of ?1 with no ceiling of maximum amount. The maximum tenor will not exceed 2 to 3 years from the date of transfer of the original asset. The minimum tenor for the maturity option would be 7 days, and for the income option, 6 months. After the tenor, FD shall be automatically closed.
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