Capital Gains Account Scheme: If you have sold any capital assets, you may have to pay tax on the profits. However, if you invest in any other property or assets prescribed under the Income Tax Act, then you get tax relief. But on the contrary, a situation arises that you are not able to invest the capital gains in any assets within the stipulated time. In such a situation, the Capital Gains Account Scheme proves to be very useful. By keeping money in this account, not only does one get relief from paying heavy taxes on gains but also interest income on the deposited capital.
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Special Features of Capital Gains Account Scheme
- The main objective of this scheme has been brought to encourage people to reinvest the capital gains from the sale of property in any asset. However, if you are not able to invest it within the stipulated time, but after some time want to invest in a residential property or any other asset which is tax exempt, then you can deposit this money under Capital Gains Account Scheme.
- Two types of accounts can be opened under this scheme – Type A Savings Deposit and Type B Term Deposit. Type A account is like a regular savings account in which an amount equal to the interest earned on the savings account is deposited in the account opened under the Capital Gains Account Scheme over a regular period. On the other hand, Type B account is a kind of fixed deposit account in which interest is earned according to the term deposit. Type A has liquidity i.e. the facility to withdraw money whenever and while Type B has the same restrictions as term deposits. Both the types of accounts also get the facility of covert to each other but transfer from type B to type A is considered as premature withdrawal.
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- You cannot transfer your account from one bank to another but can transfer to other branches of the same bank.
- The facility of opening these accounts is not available at all branches of banks, as the country’s largest bank cannot open accounts under this scheme in rural branches of SBI.
- Separate applications will have to be made to get the exemption under different sections, which will open separate capital gains accounts for them. For example, under section 54 of the Income Tax Act, an individual or HUF can open this account on the sale of residential property, while on transfer of a residential property, any taxpayer can open this account under section 54GB.
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- To close the account, a certificate has to be produced from the Income Tax Officer of the concerned area.
- Loan facility is not available on the capital deposited in the account opened under this scheme.
- A maximum of three nominees are allowed to nominate the account opened under this scheme. Though one cannot make a nominee in the account opened in the name of a minor but can make a minor as a nominee and appoint a person who will get the money during the minority of the nominee after the death of the account holder.
- Tax liability is made on the interest earned on the account opened under this scheme.
- Any amount that cannot be invested in specified assets after 60 days of withdrawal or specified time limit may attract tax.
(Input: SBI and Cleartax)
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