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Sale of Long term capital assets will either result in loss or gain for the owner of such capital assets, if the transaction results in loss then such loss can be adjusted in current or future years with gains under the head capital gain. Whereas if the resultant figures of such sale transaction is gain, then such gain is taxable at special rates prescribed under income tax act 1961 .

The Income Tax Act, however, allows you to save taxes on these capital gains by making investments under Sections 54 to 54GB.

A taxpayer who’s unable to re-invest capital gains in specified modes to claim exemption before due date of filing of Income Tax Return and the time period for making investments under the specified sections has not been expired, then the taxpayer can deposit the unutilized amount in Capital Gain Account Scheme 1988 .

The Capital Gain Account Scheme (CGAS) was introduced in 1988 by the central government. The CGAS Scheme has total 13 rules which deals with various issues involved in deposit of unutilized amount under capital gain account.

All about Capital Gain Account Scheme 1988

These rules are accessible at

Now we’ll discuss the issues involved for a taxpayers who is willing to deposit the unutilized amount in bank account under CGAS 1988:

Category of Assessee who are eligible to deposit the amount under Capital Gain Account Scheme

It applies to all assessees who are eligible for exemption under section 54, 54B, 54D, 54F [, 54G or 54GB] of the Income-tax Act, 1961

Types of Deposit Account under this Scheme

There shall be two types deposits, namely;

  • Deposit Account- A
  • Deposit Account- B

Deposit Type A shall be in the Form of Savings Account, withdrawals under this type of account can be made from time to time by the depositor.

Deposit Type B shall be in the Form of Term Deposit, with an option to the depositor to keep the deposit as a cumulative or non-cumulative basis. Withdrawal under this type can be made only after expiry of the specified period of time.

Procedure for account opening under CGAS 1988

Account can be opened by making an application in duplicate in Form A along with other required details or documents such as PAN, Address Proof, and Photograph Etc.

While applying for bank account opening, the depositor is required to indicate whether the account to be opened is Type A account or Type B account. Further in case the depositor is opting for Type B account, then he shall also mention whether the deposit is to be made on cumulative basis or on non cumulative basis.

The payment of deposit amount can be made in either in cash, or by cheque or demand draft.

Effective date of deposit, in order to claim the benefit of exemption shall be the date of deposit of cheque or draft at deposit office (subject to realization).

In case the deposit is made under Type A account, then the bank will issue a passbook wherein all the details of deposit, withdrawal, interest due, etc shall be recorded.

In case the deposit is made under Type B account, then the bank shall issue a deposit receipt wherein the principal amount, date of deposit etc shall be mentioned.

Procedure for transfer and conversion of the account

  1. Depositor may apply to transfer his or her account from one branch to another branch of the same bank
  2. Type B account may be converted into Type A account by making application in From B to the bank. In case the depositor doesn’t have Type A account, then he shall make a request for opening an account A in his/ her name
  3. If the amount standing in credit of Type B Account is transferred to Type A Account, then such transfer shall be treated as premature withdrawal
  4. After the conversion of account-B to account-A or vice versa in the manner specified above, the interest in newly opened account or accounts, as the case may be, shall accrue with effect from the date of opening of such account or accounts

Rate of Interest on these deposits

In case of Type A account, Interest on the amount deposited under these accounts shall be allowed at such rate as may be specified by Reserve Bank of India and shall be credited to the account at the end of each half-year.

In case of Type B account, interest on deposited amount shall be calculated at rate specified by the Reserve Bank of India.  In case of cumulative deposit in account-B, the amount of interest accrued will be deemed to have been reinvested and in case of non-cumulative deposit in account-B, the amount of interest will become due and payable at quarterly intervals

If the amount is transferred/ withdrawn or account has been closed before completion of period for which the deposit in account B has been made, then there will be one percent penalty for a premature withdrawal on account of such conversion or withdrawal or closure.


Type A account:

A depositor may make an application in Form C for withdrawal together with passbook to the bank, on receipt of the application the deposit will allow the withdrawal and will mention the amount withdrawn in passbook

Further, if the withdrawal request is subsequent request, depositor shall also submit filled in Form D mentioning the utilization of funds withdrawn earlier

Note: if the amount of withdrawal is more the INR 25000, then the bank shall issue crossed demand draft drawn in favour of the person to whom the depositor intends to make the payment

Type B account:

in this case, the depositor shall firstly apply to transfer the amount to Type A account (as discussed above), further if the withdrawal from Type B account is before expiry of specific period then the same shall be treated as premature withdrawal and be liable to penal interest

Further the bank has right to refuse the depositor to withdraw any amount lying in his account, in case of failure on his part to furnish all the details as required (such as Form D)

Utilization of amount of withdrawal

The amount withdrawn shall be utilized by the depositor within 60 days from the date of such withdrawal for the purposes as stated in respective section.

Further if the amount remains unutilized, the same shall immediately be re-deposited in account A.

Nomination by the depositor

  1. The depositor may nominate maximum three persons to receive the amount standing to his credit in account A or account B by filing Form E.
  2. No nominations shall be made in respect of an account opened on behalf of a minor or a Hindu undivided family or a firm or a company or an association of persons or a body of individuals.
  3. Fresh nomination may be filed in case there’s any variation in nominations already filed, the application for fresh nominations shall be filed in Form F

The amount as standing in Account A or Account B can’t be placed or offered as security for any loan or guarantee

Account closure procedure

  1. The depositor shall make an application in Form G with the approval of Jurisdictional Assessing Officer, and the bank will transfer the balance amount if any to the credit of any bank account of the depositor
  2. If the depositor dies, then the Nominee (if the nomination is in force) or legal heir (if there’s no nomination) shall file an application in Form H with the approval of Jurisdictional Assessing Officer for closure of account to the concerned bank.  On receipt of application the bank will transfer the balance amount to the credit of any bank account or nominee or legal heir

Interest earned on these deposit accounts are liable to tax subject to tax law and tax will be deducted by bank and TDS certificate will be issued to the depositor

If the amount remains unutilized even after a specified period of 60 from the date of withdrawal, the same shall be taxable as per the applicable provisions under Income Tax Act 1961.


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