Benefits of capital gains account scheme

Capital gains occur when the value received on a property’s transfer or sale is higher than its calculated costs. They do not use the amount of capital gains that are not used by an assessed towards the purchase of another property before one year from the date of transfer or within two year from the date of transfer of the original property or built within 3 years from the date of transfer, or that for the purchase or building of a new property before the date of providing the return of income, should be deposited by him in a stated nationalized bank. Under the Capital Gain Account Scheme, 1988, the balance should be deposited into the account. The scheme applies to all assesses that have capital gains. The deposits may be made at any time either in one lump sum or in installments.  Before the due date for filing income tax returns, the amount should be deposited.

Mainly, individuals and Hindu Undivided Family can derive the advantage of the Capital Gains Account Scheme. More precisely, in the Capital Gains Accounts Scheme 1988, all those taxpayers who would like to invest in buying a residential property or in building residential property to save tax on a long-term capital gain can find many advantages.

Before analyzing the characteristics of this scheme, it may be recalled here that various provisions are contained in the Income Tax Act, 1961, to save tax on the capital gain. You can benefit if the investment is made one year from the date of transfer or within two years from the date of sale / or built within three years from the date of sale, one may save long-term gain tax on capital gains, especially if the investment is made in the acquisition of another residential property. Similarly, if taxpayers were to develop residential property, the construction period is three years from the date of sale. Now, the role of Capital Gain Account comes in between.

All taxpayers who take advantage of the investment mentioned above schemes in residential property are advised to take advantage of the Capital Gain Account, mainly if they are not in a position to invest in residential property by the last date of filing the income tax return.

Account types

Deposit Account A: It’s like a savings deposit account. Occasionally, withdrawals may be made from the account, according to scheme conditions. This account is ideal for assessors who plan to build a house over a period.

Deposit Account B:  This account is like a term deposit, payable after a fixed period. The interest earned on the deposit can either be annually withdrawn or reinvested. To open the account, an assesses must fill out a copy of the specified application form. Also, the account form-A or B-must be defined. Where Deposit Account B is opted for, whether the account will be cumulative or non-cumulative must be specified. All accounts are eligible for interest, in compliance with the Reserve Bank of India guidelines. Besides, by filling out the appropriate paperwork, a depositor may make or alter nominations to the account.