The capital gains account scheme (CGAS) that facilitate tax exemption for profit accrued from property sale are gaining momentum, according to bankers.
“CGAS is a good option for people to get tax breaks. More and more people are declaring their gains these days and utilising CGAS,” said an official from Indian Overseas Bank.
If you are unable to invest your long-term capital gains from sale of a property within the stipulated period and hence not eligible for exemption from wealth tax on accrued profits, CGAS could help you, bankers said.
Encouraged by customers’ positive response to CGAS, banks have started designating a higher number of branches where people could avail the facility. This has helped spread awareness about CGAS, they said.
Wealth tax is imposed on the basis of ownership of certain assets like residential property, farm house, expensive jewellery, so on. Wealth tax is payable at 1% of the aggregate value of the taxable asset exceeding `30 lakh in value as on March 31.
You can open this tax-saving account at any state-owned bank’s designated branch (generally, in metros and city branches). The money parked in this account is eligible for exemption under sections 54, 54B, 54D, 54F and 54G of the Income Tax Act 1961.
Types of CGAS
There are two options available. The first type (A) has a lock-in period of three years and acts like a savings account. The account-holder is free to withdraw the amount deposited as and when he wants. Interest will be paid at the bank’s savings account rate.
The second type (B) is a term deposit-like scheme encompassing two options – cumulative interest (interest reinvested) and non-cumulative (quarterly withdrawal). This rate is fixed by the bank concerned in line with its term deposit rates. Interest earned from these accounts is taxable.
Effective date for claiming exemption will be the date when banks receive your application. Also, the amounts can be transferred from type A to B and vice versa.
“This a short-term arrangement to postpone one’s investment decisions and get exemptions from the wealth tax,” said Jayant Vidwans, president of the Society of Financial Planners.