2.

11 Capital Gain Account Scheme, 1988

Introduction of Scheme:

Government of India, Ministry of Finance, Department of Revenue (CBDT) in exercise of the

powers conferred upon by Section 54 of the Income Tax Act, 1961 formulated a scheme called
"The Capital Gains Account Scheme, 1988".

According to the provisions of Section 54 (F) of Income Tax Act,1961 w.e.f. 1.4.1988, an assessee
earning long term capital gains on sale of any asset who desires to utilize the net consideration
for purchase of residential house within two years (2 years) from the date of sale of the capital
asset is exempt from tax on the capital gains provided he deposits the sales consideration in
authorized branches of Banks authorized to receive deposits and maintain accounts. The amount
deposited in the account is permitted for withdrawal for the purpose of purchase of house for
self residence of the depositor, within two years of receipt of sales consideration. If the amount is
not utilized within a period of two years, the long term capital gain on sale of the capital asset
shall be subject to tax in the year in which the long term capital gains were earned. For
withdrawing money from this account after the period of -2- years is over without purchasing
house for self residence, the permission of Income Tax department is necessary.

All branches of public sector banks (except rural branches) are authorised to accept deposits
under the scheme.

Types of accounts:

The scheme provides for two types of accounts viz.

1. Account A which is in the form of "Savings Deposits".

2. Account B which is in the nature of "Term Deposits".

(In exceptional cases like customers belonging to Bora Muslim community, current account titled
A-I can be opened instead of savings deposits).

Opening of accounts:
Any person / firm / association of persons / company / HUF etc. intending to avail of the benefits
under Section 54, 54B, 54D, 54F and 54G of the Income Tax Act, 1961 (43 of 1961) may open
abovementioned accounts.
Other Provisions:
Joint accounts cannot be opened under Capital Gains Accounts Scheme, 1988.

Nomination:
Individual depositor (not being a minor) can make nominations in favour of one or more persons,
but not exceeding three, to receive the amounts standing to his credit in Account A or Account B
in the event of his death before the amount has become payable, or if payable, but not paid.

Cancellation or change of nomination made earlier will be allowed.

RATE OF INTEREST:
The rate of interest is as per the rate advised by Bank for domestic term deposit from time to
time.

The amount standing to the credit of the depositor in this account cannot be charged as security
for loans/ guarantees or alienated in any manner, whatsoever.

Withdrawals:

First withdrawal from Account “A” can be allowed on application in Form 'C', accompanied by the
relative pass book, subject to other provisions of the scheme.

Such withdrawals will be recorded in the ledger and pass book, with suitable narrations followed
by a noting "First W/D" in the 'Remarks' column.

For subsequent withdrawals, Form D should also be submitted in duplicate stating therein the
details regarding the manner and extent of utilisation of the immediate preceding withdrawal.

One copy of Form D should be returned to the depositor duly authenticated. Submission of Form
D should be noted in the ledger account.

Where the amount of withdrawal exceeds Rs. 25,000/-, payment should be made by way of
crossed demand draft/ banker's cheque only, in favour of the person, to whom the depositor
intends to make payment.
Where withdrawal is sought from Account B, the depositor shall first apply for conversion to
Account A as per the provisions of para (ii) and thereafter apply for withdrawal from Account A in
accordance with para (iii) (a) to (e) above.

Request of the depositor for withdrawal can be refused in the event of his failure to comply with
all requirements as provided under the Scheme.

Amounts withdrawn out of the deposits made in pursuance of sub-section (2) of Section 54, 54B,
54D o 54G and sub- section (4) of Section 54F, shall be utilised in whole or in part for the
purposes specified in sub-section (1) of the relative section, within 60 days from the date of the
withdrawal, failing which the whole amount or part thereof not so utilised shall be deposited
back to Account A.

The amount deposited in the account is permitted for withdrawal for the purpose of purchase of
house for self residence of the depositor ,within 2 years of receipt of sales consideration.

If the amount is not utilized within a period of 2 years the long term capital gain on sale of capital
asset shall be subject to tax in the year in which the long term capital gains were earned.

For withdrawing money from this account after the period of two years is over without
purchasing house for self residence, the permission of Income Tax department is necessary.

Closure of the account:

A depositor desirous of closing his account(s) shall apply on Form G duly approved by the
assessing officer, who has jurisdiction over the depositor along with the relative pass book and/or
deposit receipts.

The amount along with up-to-date accrued interest can be paid to the depositor by crediting
such amount to any bank account of the depositor.

In respect of a deposit account where a nomination is in force, the nominee, may, on the death of
the depositor, apply for closure of the account in Form H duly approved by the assessing officer,
who has jurisdiction over the deceased depositor along with the relative pass book and/or
deposit receipt.

The amount standing to the credit of the deceased depositor along with up-to-date interest can
be paid by crediting such amount to any bank account of the nominee.
Where no nomination is in force at the time of death of the depositor, the legal heir may claim
the amount and receive the same in the manner stated in (3) (c) & (d) above.

Where there are several legal heirs of the deceased depositor, the legal heir making the claim
individually may do so by producing a letter of disclaimer or letter of authorisation from the
other legal heirs in his favour.

Payment made to the depositor/nominee/legal heir, as the case may be, in accordance with the
provision of the scheme, shall constitute a full discharge to the deposit office of its liability in
respect of the deposit.

Forms:
All forms mentioned above as required in the aforesaid scheme, should be obtained from the
income tax department authorities.
(i) Introduction :

Government of India, Ministry of Finance, Department of Revenue (CBDT) in exercise of the

powers conferred upon by Section 54 of the Income Tax Act,

1961 formulated a scheme called "The Capital Gains Account Scheme, 1988".

According to the provisions of Section 54 (F) of Income Tax Act,1961 w.e.f.

1.4.1988, an assessee earning long term capital gains on sale of any asset who desires to utilize
the net consideration for purchase of residential house within two years (2 years) from the date
of sale of the capital asset is exempt from tax on the capital gains provided he deposits the sales
consideration in authorized branches of Banks authorized to receive deposits and maintain
accounts. The amount deposited in the account is permitted for withdrawal for the purpose of
purchase of house for self residence of the depositor, within two years of receipt of sales
consideration. If the amount is not utilized within a period of two years, the long term capital
gain on sale of the capital asset shall be subject to tax in the year in which the long term capital
gains were earned. For withdrawing money from this account after the period of –2- years is over
without purchasing house for self residence, the permission of Income Tax department is
necessary.

All branches of public sector banks (except rural branches) are authorised to accept deposits
under the scheme.

(ii) Types of accounts :

The scheme provides for two types of accounts viz.
(a) Account A which is in the form of "Savings Deposits".

b) Account B which is in the nature of "Term Deposits".

(In exceptional cases like customers belonging to Bora Muslim community, current account titled
A-I can be opened instead of savings deposits).

(iii) Opening of accounts :

(i) Any person/firm/association of persons/company/HUF etc. intending to avail of the benefits

under Section 54, 54B, 54D, 54F and 54G of the Income Tax Act, 1961 (43 of 1961) may open
abovementioned accounts.

(ii) Intending depositors should make an application in Form 'A' in duplicate, separately for each
section of the Act, under which benefits are to be availed.

(iii) The depositor should indicate in the Form 'A' his option for Account A or Account B or both.
Where the option is for Account B, it should also be indicated, whether it is cumulative or non-
cumulative.

(iv) Deposits can be made in cash or cheques/drafts, in one lumpsum or in convenient

instalments before the due date of furnishing the return of income under Section 139 (i) of the
Act as applicable to the depositor.

(v) The date of tender of cheques/drafts, will be deemed to be the date of deposit for claiming
exemptions under the Act. However, interest will be reckoned from the date of realisation only.

(vi) Joint accounts cannot be opened under Capital Gains Accounts Scheme, 1988.

(vii) Application for opening of account under the scheme is enclosed as per APPENDIX –XII. The
branches are also, however, advised to obtain usual account opening form for the specimen
signatures and other particulars in addition to this form

(iii) Nomination :
(a) Individual depositor (not being a minor) can make nominations in Form 'E' in favour of one or
more persons, but not exceeding three, to receive the amounts standing to his credit in Account
A or Account B in the event of his death before the amount has become payable, or if payable,
but not paid.

(b) cancellation or change of nomination made earlier will be allowed on application in Form 'F'.

(c) Nominations as also their cancellation and/or variations, should be registered in the bank's
books and the same will be effective from the date of such registration.

(d) Where the nominee is a minor, the depositor may appoint any person to receive due
amounts, in the event of his death during the minority of the nominee.

(e) In all cases, the first named nominee is alone entitled to receive the due amounts in the event
of death of the depositor.

(f) Where, however, the first named nominee predeceases the depositor and the depositor has
not cancelled or substituted the nomination, the second named nominee is entitled to receive
the due amount in the event of death of the depositor.

(g) Provided further, that if any nominee is dead, all surviving nominees shall produce proof of
death of the depositor as well as that of the deceased nominee(s).

(iii) Accounting of deposits :

(1)For deposits received under Account ‘A’

Issue a savings bank pass book to the depositor showing, in addition to the usual particulars, his
P.A. number, nominations, etc. The pass book should also bear the superscription “CGAS-88-
Account-A”
If the pass book is lost or destroyed, duplicate may be issued on request.
Cheque book facility cannot be permitted in view of the system of withdrawal prescribed in the
Scheme.
Minimum balance should be maintained as per guidelines.
(2) For deposits received under Account B

(1) Issue a receipt to the depositor on our usual FDRs, additionally indicating thereon :
(a) -name(s) of nominee(s)

(b) -P.A. number

(c) -whether cumulative or non-cumulative

(d) superscription as “CGAS-88-Account-B”.

(2) The rate of interest is as per the rate advised by Bank from time to time.

(3) In the event of loss or destruction of the receipt, duplicate may be issued on request.

(4)The amount standing to the credit of the depositor in this account, cannot be charged as
security for loans/ guarantees or alienated in any manner, whatsoever.

(5) Interest will be allowed on the deposits at the rates prescribed by the Bank from time to time.

(6) Interest accrued is deemed to have been reinvested in case of cumulative deposits, while in
case of non- cumulative deposits, it is due and payable at quarterly or longer intervals. However,
the interest earned on cumulative or non-cumulative deposits in Account B, cannot be withdrawn
separately and will have to be necessarily through Account A.

(ii) Transfer and conversion of accounts :

(a) Transfer of account(s) from one branch of our bank to another, can be allowed at depositor's
request.

(b) Transfer of deposit in Account B to an existing Account A of the depositor or vice-versa either
in full or in part (if both are under the same section of the Act) or for opening a new Account-A,
can be allowed on application in Form B accompanied by the deposit receipt/pass book.

(c) Where, however, the deposit in Account B is sought to be transferred before its maturity to
Account A, rules relating to prepayment of time deposits will apply.
(iii) Withdrawals :

(a) First withdrawal from Account “A” can be allowed on application in Form 'C', accompanied by
the relative pass book, subject to other provisions of the scheme.

(b) Such withdrawals will be recorded in the ledger and pass book, with suitable narrations
followed by a noting "First W/D" in the 'Remarks' column.

(c) For subsequent withdrawals, Form D should also be submitted in duplicate stating therein the
details regarding the manner and extent of utilisation of the immediate preceding withdrawal.

(d) One copy of Form D should be returned to the depositor duly authenticated. Submission of
Form D should be noted in the ledger account.

(e) Where the amount of withdrawal exceeds Rs. 25,000/-, payment should be made by way of
crossed demand draft/ banker's cheque only, in favour of the person, to whom the depositor
intends to make payment.

(f) Where withdrawal is sought from Account B, the depositor shall first apply for conversion to
Account A as per the provisions of para (ii) and thereafter apply for withdrawal from Account A in
accordance with para (iii) (a) to (e) above.

(g) Request of the depositor for withdrawal can be refused in the event of his failure to comply
with all requirements as provided under the Scheme.

(h) Amounts withdrawn out of the deposits made in pursuance of sub-section (2) of Section 54,
54B, 54D o 54G and sub- section (4) of Section 54F, shall be utilised in whole or in part for the
purposes specified in sub-section (1) of the relative section, within 60 days from the date of the
withdrawal, failing which the whole amount or part thereof not so utilised shall be deposited
back to Account A.

(i) The amount deposited in the account is permitted for withdrawal for the purpose of purchase
of house for self residence of the depositor, within 2 years of receipt of sales consideration.

(j) If the amount is not utilized within a period of 2 years the long term capital gain on sale of
capital asset shall be subject to tax in the year in which the long term capital gains were earned.
(k) For withdrawing money from this account after the period of two years is over without
purchasing house for self residence, the permission of Income Tax department is necessary.

(3)Closure of the account :

(a) A depositor desirous of closing his account(s) shall apply on Form G duly approved by the
assessing officer, who has jurisdiction over the depositor along with the relative pass book and/or
deposit receipts.

(b) The amount along with up-to-date accrued interest, can be paid to the depositor by crediting
such amount to any bank account of the depositor.

(c) In respect of a deposit account where a nomination is in force, the nominee, may, on the
death of the depositor, apply for closure of the account in Form H duly approved by the
assessing officer, who has jurisdiction over the deceased depositor along with the relative pass
book and/or deposit receipt.

(d) The amount standing to the credit of the deceased depositor along with up-to-date interest
can be paid by crediting such amount to any bank account of the nominee.

(e) Where no nomination is in force at the time of death of the depositor, the legal heir may claim
the amount and receive the same in the manner stated in (3) (c) & (d) above.

(f) Where there are several legal heirs of the deceased depositor, the legal heir making the claim
individually may do so by producing a letter of disclaimer or letter of authorisation from the
other legal heirs in his favour.

(g) Payment made to the depositor/nominee/legal heir, as the case may be, in accordance with
the provision of the scheme, shall constitute a full discharge to the deposit office of its liability in
respect of the deposit.

(3)Forms :
All forms mentioned above as required in the aforesaid scheme, should be obtained from the
income tax department authorities.