Capital Gains Account scheme: A detailed guide

When you think about assets, they include immovable properties, vehicles, leasehold earnings, jewellery, machinery, or intellectual properties such as patent, trademarks, etc. Capital assets are direct rights where the Indian companies include the management rights or ownership control along with other holding rights.

Overview of the concept:

It is the net profit which the investors earn after selling any of the capital assets at a rate which exceeds the original price. The transfer of such assets must get done in the previous financial year for being eligible for the current taxation year. The entire value of such sale is taxable under the term capital gain. Three elements back the capital gain process –

Assets such as gold, property, etc.

Transfer of capital assets

Profits earned owing to such transfers

For this purpose, the Indian Government launched the capital gain account scheme in 1988. Here, the investor should deposit for reinvesting and availing the exemptions within the specified time frame. Sometimes, they are longer than the due date to file the return of income. In such scenarios, the taxpayer can deposit underutilised capital gains under the account introduced by the scheme.

Any capital gain invested in the capital gain account is eligible for exemption as it would in case of re-investment.

Eligibility criteria:

Any taxpayer or individual or HUF member can deposit in the scheme. Those who are unable to reinvest their capital gains in a specific investment, before the specified time frame, and before the income tax returns get furnished, they must deposit the capital gains which are unutilised in the capital gain account scheme 1988. Remember, complete the task before furnishing the income tax returns.

Opening of the account:

The capital gain account is accessible in any authorised bank branch which excludes the rural offices. The process is as follows –

You can open the account by applying in duplicate form A.

The documents needed are PAN card, address proofs, passport-size photograph

You deposit using any mode such as cash, cheque, demand draft, etc. If you make the deposits through cheque or DD, the deposit date will be the date on which you receive the cheque or DD, subject to realisation

You can make the deposits either in lump sum or installments Separate applications are available for receiving exemptions under different sections, and a separate capital gain account gets opened for the same