CGAS account Holder Deceased

In my view, the legal heirs are not required to open a fresh CGAS account and continue construction merely to preserve the exemption claimed by the deceased. On the death of the assessee, the unutilized CGAS balance forms part of the estate and can be claimed by the legal heirs. The exemption already allowed to the deceased is generally not withdrawn, and the unutilized balance is ordinarily not taxable in the hands of either the deceased or the legal heirs, subject to the facts of the case and relevant judicial precedents.

In case of the demise of the CGAS account holder, the nominee/legal heir can make a claim for closure of the account and obtain the balance amount standing to the credit in CGAS. This application for closure is typically to be made in Form H along with the death certificate, passbook/deposit receipt, KYC documents and other necessary documents prescribed by the bank. Where there is no nomination, the legal heir is usually required to obtain the legal heir certificate/succession documents and disclaimer certificates of other legal heirs (if any). 

From an income-tax point of view, the balance unutilized funds lying in the CGAS account on the death of the depositor are not treated as income and are not liable to tax in the hands of the legal heir simply because the latter receives the amount. The CBDT has ruled that it forms part of the estate that is transferred to the legal heirs and is not an income.

However, if any interest continues to be earned by the bank on the balance funds in the account after the death of the depositor, then interest income may be taxed in the hands of the legal heir(s). The CBDT has also ruled that tax deduction at source on the interest credited after the depositor's death should be linked to the PAN of the legal heir rather than thePAN of the deceased depositor.

Could you please let us know if a nominee is registered in CGAS account and also the name of the bank so that appropriate procedure and documents required may be specified.

Yes, Nominee added, Indian Bank CGAS...

The legal heirs don't have to complete the construction or pay the capital gains tax:

• CBDT Circular 743 dated 6 May 1996: the unutilised amount in a deceased depositor's CGAS account is not taxable in the legal heirs' hands. It partakes the character of the estate (corpus), not income. Sec 54(2) taxation of the unutilised amount arises only for the assessee who claimed the exemption, and death before the period ends doesn't trigger it for the heirs.

• So the heirs need not open a new CGAS account or build. The deceased's exemption claim is not reopened. (Some AOs argue tax in the deceased's final return; the Circular supports the heirs' position.)

• Procedure: the nominee or legal heir applies to the bank for closure in Form H (instead of Form G), with the death certificate and legal-heir or nominee documents. The AO's approval is generally not needed for nominee claims under the scheme; banks follow Rule 9 of the CGAS.

• The plot purchased stays part of the estate. Its cost carries to the heirs (Sec 49(1)).

• File the deceased's final ITR (by the legal representative registered on the portal) for income up to the date of death.

Yes no need to pay Income tax, closed the account...thanks everyone...