The Indian government has introduced significant upgrades to the Capital Gains Accounts Scheme (CGAS), providing taxpayers with enhanced flexibility and digital convenience for managing their unutilised capital gains. The Ministry of Finance officially notified these changes through the Capital Gains Accounts (Second Amendment Scheme) on November 19, marking a substantial modernization of the tax-saving framework.
What is CGAS and How It Benefits Taxpayers?
The Capital Gains Accounts Scheme serves as a crucial tool for individuals who have sold assets but haven't immediately reinvested the proceeds. This mechanism allows taxpayers to deposit their unutilised capital gains in designated accounts, thereby enabling them to claim tax exemptions under various sections of the Income Tax Act.
This scheme proves particularly beneficial for property sellers who can deposit their unutilised capital gains for up to three years while availing tax exemption under Section 54 of the IT Act. The scheme covers capital gains arising from the sale of residential properties, flats, equity shares, farmhouses, and agricultural land, among other assets.
When you sell a property held for more than two years, you typically face a 20% long-term capital gains tax with indexation benefits. However, the IT Act provides exemptions if you purchase another property or capital asset within specified timeframes - within two years for purchase or three years for construction.
Key Operational Features of CGAS
The scheme operates through two types of accounts: Type A (savings account) and Type B (term deposit). All transactions must route through the savings account, meaning even those wanting to keep their entire amount in term deposits need to maintain both accounts.
Interest rates align with regular banking products - term deposits earn fixed deposit equivalent returns, while savings accounts receive standard savings account interest rates. The minimum deposit requirement stands at ₹1000, with no upper limit on the maximum balance.
However, certain limitations apply: loans cannot be availed against these deposits, term deposits cannot serve as collateral, and auto-renewal facilities aren't available. Upon maturity, proceeds automatically credit to the Type A savings account.
Major Enhancements in the Updated Scheme
The revised scheme introduces several groundbreaking changes that significantly enhance user convenience. Electronic payment methods now include UPI, debit/credit cards, net banking, IMPS, RTGS, NEFT, and BHIM Aadhaar Pay, bringing the scheme in line with modern digital banking practices.
Perhaps the most significant expansion involves the inclusion of 19 private sector banks alongside existing public sector banks and IDBI Bank. This broader banking network increases accessibility for taxpayers across different regions and banking preferences.
Starting April 1, 2027, taxpayers will be able to close their CGAS accounts electronically through digital signature certificates or electronic verification codes. The government has also recognized electronic statements as equivalent to traditional passbooks, simplifying verification processes.
Additionally, the amended scheme extends exemptions for unutilised capital gains arising from shifting industrial undertakings from urban areas to Special Economic Zones (SEZs), providing broader coverage for business-related transactions.
These comprehensive updates represent the government's commitment to digitizing tax processes and making tax-saving instruments more accessible and user-friendly for Indian taxpayers navigating capital gains scenarios.
