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UTKARSH SOVANI (A)     23 March 2010

Capital gain Account Scheme

hi friends

while going through capital gains i met with the exemption if amount is deposited under capital gain account scheme.
please highlight the intent of the scheme. is the Act just wants us not to utilize capital gain money for certain period or have a different intent.
if money is deposited in some fixed deposit scheme other than capital gain deposit scheme .i.e. in fixed deposit scheme of any nationalize bank then is their any problem in getting exemption.

Waiting for the answer.



 9 Replies

SHUVRO

SHUVRO ( (WANT TO LEARN) )     23 March 2010

EAR UTKARSH 

THERE EXISTS 2 TYPES OF CAPITAL GAIN ACCOUNT

TYPE A IS LIKE A SAVINGS ACCOUNT FROM WHERE U CAN WITHDRAW THE MONEY AND TYPE B IS A SORT OF TERM DEPOSIT. U CAN OPT FOR ANY OF THESE TWO AND ALSO CONVERT THE TERM DEPOSIT ONE TO SAVINGS.

U CAN GET THESE ACCOUNT IN THE SBI

vivek singhal

vivek singhal (Chartered accountant)     23 March 2010

dear Utkarsh,

 if u deposite the capital gain amount wholly or partly only in CGScheme, then u would be eligible for this. otherwise not.

Amir

Amir (Learner)     23 March 2010

Dear Utkarsh,

Just want to add what friends above have rightly said -

CGA {Capital Gain account schemen} is nothing but "Earmarking of funds" for the purposes defined in the section in which exemption is being claimed.

The amount is to be invested/deposited before the due date of filing return of income for the year in which exemption is claimed.

The time period in which this amount is to be utilized is also prescribed by the law.The amount whcih is not utilized for the said purpose will be taxable on the expiry of the period for which it was earmarked.

The interest earned on the balance lying in this account is a taxable one.

Some of the purposes for which CGA is opene are- Purchase/Construction of Residential House, Land. Purchase of Plant/Machinery, Shifting expenses, etc

 

Apart from this I coudnt recollect anyother scheme for earmarking of funds .......

But yes u/s 54EC there are NHAI/REC Bonds which have been notified & exemption of capital gain can be claimed by investing in those Bonds.

 

1 Like
UTKARSH SOVANI

UTKARSH SOVANI (A)     23 March 2010

hey amir 

if i dont put that money in CG account Scheme & just deposit it with a SBI in the form of normal FD within the time limit specified u/s 139(1), & the same is encashed only for purchase of land. & the said land is purchased after expiry of time u/s 139(1).  then can i get an exemption for that  amount

Amir

Amir (Learner)     23 March 2010

Dear Utkarsh,

The first rule of Interpretation is the "Literal Rule" - So when Law has specified a particular way to reach to a destination then mere reaching a destination will not serve the purpose...U have to walk on the road prescribed by Law..................................................:)

So, any deposit other then CAG Scheme will not be eligible..............

1 Like
Ayushraj

Ayushraj (Professional)     24 March 2010

Dear Amir & othrs,

It is true that Bank allow withdrawal of amounts from Capital Gains a/c for making payment to Builders, etc. But one of the important condition is also that at the time of closer of account, when we may have some balance left out in the account. we need to obtain a Permission letter from the ITO concerned. This generally dissuade the assesse.

 

(1) Can any one eloborate in details (out if Personal Experience) as to is it that easy to get the necessary permission from the ITO. (Ofcourse after we follow all the related provisions of Law)?

 

(2) What information/ documents will be required for obtaining permission from the ITO?

 

(3) Will Personal Meeting/ follow off required in the matter?

 

(4) Is it better to pay Tax on Capital Gains (If the Tax amount involved is less) or possibily take benefits of other provisions of the Act for exemption (like investment in Bonds, etc) instead of depositing the amount Capital Gains a/c?

 

V Ishu  Hegde

V Ishu Hegde (CA Practice )     05 April 2010

YOU CAN KEP A MINIMUM BALANCE IN THE ACCOUNT AS REQD BY BANK THEN CLOSE THE ACCOUNT AND WHILE WITHDRAWING THE AMOUNT FOR PAYMENT FOR RESIDENTIAL PROPERY NOTIFY TO THE CONCERNED OFFICER

IF YOU HAVE UTILISED THE MONEY FOR PAYMENT FOR PURPOSES FOR WEHICH EXEMPTION IS TO BE GRANTED THE ITO CANNOT DENY THE EXEMPTION.

Jay Kishan Sharma

Jay Kishan Sharma (Head Article)     07 July 2011

 

I had sold one property for 180 lacs on 29.6.2011,now the purchaser of my property is paying the consideration in parts which i m depositing in my Savings Account.I am planning to buy a Residential House Property within 2 years.I came to know about the Capital Gain Depository Account Scheme.I and My mother is the joint owner of the property.
Will you clarify the following point s:
1. Can my mother open capital gain account in joint name with me? .
2. Can i deposit more amount after opening Capital gain Account as bcoz i m receiving the consideration in parts?
3. Is CGDA gives interest on deposits?At what rate?
4. Can the above amount can be invested in “ NHAI “ or “ REC” Bonds for a further period of 3 years or 7 years,which i m gonna purchase witihin 6 months ?
5. Buyer has not paid the amount in full yet and the sale deed shall be executed after i get the full amount of consideration, so in this circumstances what is the time period i.e. 6 months for purchase of NHAI bond ?

I shall be higly grateful if you can kindly advise or guide in the above matter.
It maybe mentioned that the TDS on the Interest Portion Covered on Fixed Deposit under the Capital Gains Scheme 1988 has been deducted by the bank or Deposited by me in the respective financial years .plz inform me at the earliest.

Thanking You ,

Jay Kishan Sharma

Jay Kishan Sharma (Head Article)     07 July 2011

 

I had sold one property for 180 lacs on 29.6.2011,now the purchaser of my property is paying the consideration in parts which i m depositing in my Savings Account.I am planning to buy a Residential House Property within 2 years.I came to know about the Capital Gain Depository Account Scheme.I and My mother is the joint owner of the property.
Will you clarify the following point s:
1. Can my mother open capital gain account in joint name with me? .
2. Can i deposit more amount after opening Capital gain Account as bcoz i m receiving the consideration in parts?
3. Is CGDA gives interest on deposits?At what rate?
4. Can the above amount can be invested in “ NHAI “ or “ REC” Bonds for a further period of 3 years or 7 years,which i m gonna purchase witihin 6 months ?
5. Buyer has not paid the amount in full yet and the sale deed shall be executed after i get the full amount of consideration, so in this circumstances what is the time period i.e. 6 months for purchase of NHAI bond ?

I shall be higly grateful if you can kindly advise or guide in the above matter.
It maybe mentioned that the TDS on the Interest Portion Covered on Fixed Deposit under the Capital Gains Scheme 1988 has been deducted by the bank or Deposited by me in the respective financial years .plz inform me at the earliest.

Thanking You ,


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