Interest on capital gains deposit account scheme

Dear Pratik

Under CGAS 1988 - Capital Gain Accounts Scheme 1988 is applicable to eligible taxpayers who wish to claim exemption u/s 54 for capital gain .

As per this scheme

1. Interest is not exempted under Income Tax Act, 1961.TDS will be deducted at applicable rates on TDRs.

2. Interest earned from this scheme will be treated as income from other sources.

if the sale proceeds from a land is deposited in a capital gain FD account for 6 months and then yhe principal amount invested in a flat. should the interest acquired also be  put into buying the flat after paying the TDS on the interest

No only the funds that result in cg and funds deposited in cgas should be utilised for claiming deduction u/s 54. 

The interest earned would be taxable as income from other sources. Also such interest is subjected to TDS. I.e interest earned is 10000 or more, then TDS will be deducted on the same

interest received capital gain a/c and tax paid interest amount so withdrawl interst amount