CAPITAL GAINS ACCOUNT SCHEME (CGAS): save capital gain tax


The booming real estate market meant that Kapil Kumar would manage to sell his house in Pune for a neat profit. He had bought the place 10 years ago with the idea that one day he would retire and also move out of Mumbai. However, 10 years on, the price that he was getting for his house was something that he hadn’t even dreamt of. Wanting to make hay while the sun shines, the deal had been completed in a record time. The only hitch that remained was the capital gains tax. Neat profit meant neater tax and he was thinking of ways of saving it. 

He had heard that investing the profit back in real estate does save tax. However, he didn’t want to buy in the current market. A visit to his Chartered Accountant (CA) was warranted. Maybe, he could find a way out.He did!

Kapil learnt from his CA that the Income Tax Act exempts the capital gains from the sale of a house if the taxpayer invests within two years from the date of sale or constructs another house within three years from the
date of sale. If the entire capital gain is not used, proportionate deduction is available.

Now Kapil has two years to buy the new house. However, what if by 31st July, which is the last date for filing the tax return, he hasn’t found the right property? How does he convey to the Income Tax office that he does indeed intend to buy a house within the time allotted to him and hence, will not be paying tax on the capital gains earned during the year? 

His CA advised him to keep the money in a special fixed deposit known as the Capital Gains Account Scheme (GGAS) in such cases.

Let’s assume Kapil earned longterm capital gains of `50 lakh. The tax at 20 per cent on this amount works out at `10 lakh (the 3 per cent education cess is ignored for ease of understanding). Seciton 54 offers him exemption from this tax if he purchases a house (costing R50 lakh) within two years or constructs one within three years.

Prior to 1988, Kapil would have been required to pay the tax in the financial year during which the capital gains arose, even if he intended to buy or construct a house. After purchasing or constructing a house within the stipulated time frame, he could pray for the refund. When he actually receives the refund depended upon
the strength of his prayers. Moreover, it was inconvenient for the Income Tax Office (ITO) to dig up the past records to check the veracity of the claim. 

Enter CGAS
Fortunately, the Tax Department was seized of this impractical approach. CGAS, introduced in 1988, eliminated the need to reopen the assessments for rectifications. Therefore, in effect, CGAS is a special account with banks or specified institutions to be used when the amount of capital gain is not utilised for the purchase or construction of the new asset before the due date of furnishing return of income. (Notification No. 724(E) dated 22 June 1988)

If the amount deposited is not utilised fully for purchase or construction of new asset within the stipulated period, then the amount not utilised will be treated as capital gain of the year, in which the period of three years from the date of sale of the original house expires. 

The salient features
  1. There are two types of accounts;Type-A (savings deposit) andType-B (term deposit). Type-B can be either cumulative or noncumulative.Interest rates will be the same as those applicable to the normal savings and term bank deposits.
  2. The effective date for claiming exemption will be the date on which the bank receives the application,subject to the realisation of cheque or draft. However, the interest will be payable from the date on which cash is paid or the cheque or draft is realised.
  3. Amounts are freely transferable from Type-A to Type-B and vice versa. For premature transfers from Type-B to Type-A, the normal penalties will be applicable. 
  4. Withdrawals can be made only from Type-A by submitting a declaration that the amount sought to be withdrawn is proposed to be utilised for the intended purpose. Where the amount sought to be withdrawn exceeds R25,000, the bank shall make payment by way of a crossed demand draft drawn in favour of the person to whom the depositor intends to make the payment. The amount withdrawn shall be utilised within 60 days. The unutilised portion, if any, shall be redeposited into CGAS. 

A lacunae 
That being said, there does exist some lacunae in this otherwise useful product. Let us see what these are:
  1. CGAS does not allow any withdrawals, except for the specified purpose (of buying the house), even of interest. Moreover, the investor is required to pay tax on this interest (to which he has no access) on accrual basis out of his other income. 
  2. Even if the sale is affected, in say the first month of the fiscal year  (say April ’11), the taxpayer may deposit the amount in CGAS on the last date for filing returns. In other words, he can freely utilise this money for 15 months (April ’11 to July ’12) as he likes. 
  3. We have already discussed the fact that if the amount is not utilised wholly or partly for the desired purpose, within the specified period, the unutilised amount shall be treated as capital gains of the year during which the specified period expires. 
If this amount is to be treated as capital gain of that year, can the assessee purchase another house within two years or construct within three years? Can he use CGAS once again? 

It is illogical to do so and also the fact remains that this capital gain has not arisen out of sale of house, shares,
etc. Therefore, the answers to these questions are in the negative. However, experts believe that the taxpayer has got a right to set off carried forward capital losses against these gains.


Get Latest Updates In your Inbox



. SECURITIES ` (MNP) (TDS)2007-08 01.07.12 01.09.2008 01.10.2012 06.07.2009 07.08.2012 1% excise 10(10C) 1000 court cases judgements supplied to ITO 1000 rupee note 10 year nsc 11-2008 11-2010 130 items 14.08.2008 150 Rs coin 15 august 15g 15h 18-12-2009 192(1A) 192A 194A 194c from 01.10.2009 194H 194 I 194j 194LC 1981-2007 1 PERCENT EXCISE ITEMS LIST 1 sep 2% cst 2% excise 2004 2008 2008-09 FY 2010 206AA 234A 234B 234C 234c interest calculator 234E 23AC 23ACA 23B 24C 24q annexure II 25 paisa coin 271(1)(c) 271B 271H 272B 27A 280 280 challan 281 282 283 29/08/2008 29/2008 service tax 29.04.2010. 29 AUGUST 2g meaning use 30 MARCH 31st March 32-2010 33 of 2009 35(2AA) 35(2AB) 3CD 3g meaning use 3 idiots 40(b) 43B 44AA 44AB AGRICULTURE 44 AB EXEMPTED INCOME 44AB new limit 44AB NON RESIDENT 44ad 46/2012 45/2012 49C 5/2011 50 paisa coin 54b 54EC 54f 5 day week 5th paycommission punjab 5 years post office deposit 6/2005 6 % excise 69/2010 6 crore advance limit 6th cpc 6TH PAY COMMISSION 70% of pan etds 7th Central Pay Commission 80C 80ccc 80CCD 80cce 80CCF 80CCG 80d 80DDB 80EE 80G 80GG 80GGA 80GGB 80ggc 80tta 80U 85% of pan etds 86/2008 DATED 13-08-2008 87A rebate 89(1) 89(1) relief calculator 8 tips to save tax 9.5 % rate for private epf 92E 95% of pan etds 98 dated 04/01/08 aadhaar aakash tablet aam admi aar Aayakar Sampark Kendra abatement abolished Accounting ACCOUNTING CODE accounting code for services ACCOUNTING FOR GOVT GRANTS accounting standards ACCOUNT PAYEE DRAFT ACES ADD IN Add-Ins additional relief in budget 2010 adjustment of advance FBT with advance Tax advance rullings advance salary ADVANCE TAX CALCULATOR advance tax challan ADVANCE TAX CUT OFF AMOUNT ADVANCE TAX DATES AFFIDAVIT age 80 addition pension AG Projects Technologies Ltd RT aibea wage revision aibea wage revision latest news aiboa aiboc aiboc wage revision AIG AIR airlines airline ticket booking tds all is well allowances allownces alphabet of inspiration alteration on check allowed alternate minimum tax AMENDED 3CD amendment in companies bill 2011 amendment in gratuity act 2010 amendment in registration service tax AMENDMENT IN SERVICE TAX ON RENT amendment to finance Bill 2010 AMNESTY SCHEME 2007 amt Anna Hazare anna hazzare bill vs govt lokpal bill appeal apply for new pan card against old pan card aqb arbitration arrears of salary arrears of sixth pay ARRERS TAX AS-12 ASBA assessee in default ASSESSMENT REOPENING ASSESSMENT YEAR 2008-09 REFUND atm atm 100 per day atm cash without card atm tips atm wrong debit audit cases itr filing audit limit enhanced Audit Questionaire AUDIT REPORT AUS VS IND.INDIA VS SL Automated teller machine AUTOMATION OF CENTRAL EXCISE AND SERVICE TAX ay 2010-11 bad debts Bank Bank account bank audit bank audit 2012 bank charges banking law amendment banknotes BANK SALARY banks npa provisioning bank strike 06/07/09 and 07/07/09 BARE ACT bare rules BASE RATE BY BANKS bcct BIMAL JAIN biometric pan card black and white form not acceptable black money BLOCK PERIOD blogging bobay refund BONUS bonus share book discount BOOK ON EFILING BOOK REVIEW books of accounts BOOMING INDIAN ECONOMY both House rent allowance both hra and house loan Brass Scrap BRIBE CASE BROKER BSE bsnl broadband bsnl broadband usage bsnl land line sms alert BSR CODES BUDGET08 BUDGET 2009 budget 2010 budget 2010-11 budget 2011 BUDGET 2012 budget 2013 BUDGET 2014 BUDGET 2014 CONTEST Budget-2015 budget expectations BUDGET HIGHLIGHTS budget live on computer budget live telecast budget notification budget on tv budget speech BUDGET SPEECH DOWNLOAD Business BUSINESS AND PROFESSION MEANING BUSINESS COVERED UNDER 44ab BUY HOUSE CA CAN ONLY AUDIT MVAT CA CLUB INDIA CA GIRISH AHUJA calculate arrear CALCULATE NEW PAY calculate your emi calculation of tax on salary arrears CALCULATOR CALCULATOR REVISED CA NITIN GUPTA CA PARDEEP JAIN capital asset capital formation huf Capital gain capital gain account scheme 1988 CAPITAL GAIN INDEX capital gain on repayment of loan capital gain on tenancy rights capital goods capital revenue CAPITAL SUBSIDY CAR LOAN RATE INCREASE CA ROHIT GUPTA carry forward of losses in late return cas ca services cash flow statement CASH PAYMENT DIS ALLOWANCE CASH PAYMENTS EXCEEDING 20000 CASH SUBSIDY CA sudhir Halakhandi CA Swapnil CA Vikas Khandelwal cbdt cbec CBI ARRESTED centeral sales tax rate CENTRALISED PROCESSING OF RETURNS CENTRAL PAY COMMISSION CENTRAL PROCESSING CENTER Cenvat CENVAT Credit Rules C FORM cgas 1988 challan challan 281 CHALLAN 289 challan correction challan Form 17 CHALLAN STATUS INQUIRY change in cst rate change in excise duty rates CHANGE IN PAN ADDRESS CHANGE IN PAN DATA change in tds rates in budget changes changes in new itr forms CHANGES IN SERVICE TAX ACT CHANGES IN TDS CHARGES ON CASH PAYMENT OF CREDIT CARD BILL charitable organisation check name from PAN check tds deducted online Cheque cheque bounce cheque payment before due date cheque tender date /realisation date Cheque Truncation CHEQUE VALIDITY child care leave CHILD DEPENDENT PREMIUM childeren name CHILD MARRIED PREMIUM child plan children education allownces chip based atm card cibil cibil for companies CII 2007-08 CII 2008-09 CII 2010 CII2011-12 cii 2012-13 cin CIRCULAR 3/2010 DT 2.03.2010 CIRCULAR 8-2010 CIT v. Emilio Ruiz Berdejo (2010) 320 ITR 190 (Bom.) cloning of atm card clubbing of income COLLECTION CHARGES COLOR SCHEME COMMISSION ON SMALL SAVINGS common error in 2009-10 common error in itr 4-5-6 compa companies bill 2012 COMPANIES RATE COMPANY BILL 2011 company deposit Company Law Settlement Scheme COMPANY REGISTRATION complusory payment of taxes Composition scheme service tax COMPUTER AS FAX MACHINE computer sytem at ito office CONCEPT PAPER configure yahoo mail in outlook express consolidate account statement construction purchase of house Consultancy Service Consumer Price Index continues services CONTRIBUTION TO NEW PENSION SCHEME CONTRIBUTORY PENSION FUND CONVERT FIGURES INTO WORD EXCEL COPARCENER CorpMcash corporation bank correction etds CORRECTION IN PAN DATA correction in section CORRECTION RETURN CORRECTION RETURN.ETDS cost accounting cost audit cost inflation index cost inflation index 2012-13 COST INFLATION INDEX FY 2010-11 COST INFLATION INDEX FY 2011-12 COST OF INDEXATION CALCULATOR court case in entry tax punjab cpc phone number cpf Credit card CREDIT CARD BILL PAYMENT ICICI BANK credit scores cricket team critical illness CROSSED DEMAND DRAFT CRR crr reducred CS DIVESH GOYAL CST CST 3% OR 2 % cst act 1956 cst form CST FORM STATUS cst rate changed CST REDUCE RATE ctt currency CURRENCY TRADING ILLEGAL custom custom changes in budget cusual leave DA MERGE da rate da rate 01.07.2012 da rate january 2013 da rate july 2012 da rate wef 01.01.2012 date extension DDO ASK RENT RECIPT ddt dearness allowance Debit card DEBT EQUITY RATIO debt funds debt trap declared goods DEDUCTION 80C deduction for higher studies deduction on saving bank interst deduction u/s 80DD Deemed income of employee deemed services defective return defence officers defence pay defence pay scales DELAY IN FILING delete ledger in tally DELHI HIGH COURT demat deposit tax of two quarter in single challan depreciation depreciation on car depreciation on commercial vehicle. DEPRECIATION ON INTANGIBLE ASSETS depreciation rate depreciation rate 2009-10 DETAIL AFTER E FILLING DETAIL OF TIN Determination of value DIFFRENT TYPE OF TAXES digital signature din direct payment in bank account DIRECT SUBSIDY direct tax bill direct tax changes in budget direct tax code direct tax code 2009 Disability insurance discussion Paper distribution of salary dividend distribution tax dividend striping dnd document identification number document ientification number documents required for service tax registration domestic transfer pricing donation do not call. dot double taxation dow jones download download 89(1) relief calculator download direct tax code 2012 download form 16A download fvu download idfc INFRA BONDS FORM draft reply drawback rates dtaa dtc DUE DATE AY 2010-11 due date ay 2011-12 due date extended due date extended to 31.08.2012. due date form 16 due date form 16a due date for service tax return due date June due date march tax due date of return 2008-09 due date pf esi DUE DATES DUE DATES CALENDAR DUE DATES CALENDER DUE DATES INCOME TAX DUE DATES SERVICE TAX due date to deposit tds DUE FAMILY PENSION DULICATE PAN DUPLICATE TAN dvat E-1 FORM E-1 SALE earned leave earn from home Easy Exit Scheme ebay EBOOK e book Income Tax rules EBOOK ON SERVICE TAX e-commerce economic survey economic survey 2010 economic survey 2011 economic survey 2012 Edible Oils EDITABLE INCOME TAX FORM education cess EDUCATION LOAN E ERA OF TAXES eet EFFECTIVE DATE CST RATE REDUCTION effective date of allowncs E-FILE SERVICE TAX RETURN e filing do and don'ts efiling errors efiling free efiling income tax return e filing of audit report efiling of excise return e filing processing status efiling registration problem e filing software excel free e filing through evc e filing utilities e-Intermediary Electricity act ELECTRONIC FOREX TRADING Electronic Verification Code (EVC) elegent card on holi ELSS EMANAGEMENT OF TAXES EMI CALCULATOR e mode for notice to shareholder empanelment as branch auditor EMPLOYEE PROVIDENT FUND employee state insurance employee state insurance act 1948 employee state insurance act Limit employer e sewa eMudhra Consumer Services e notice to share holder entries r off in 50 paisa entries rounded off in rs ENTRY TAX entry tax punjab e-payment from friends account e payment of epf E PAYMENT OF EXCISE DUTY e payment of income tax E PAYMENT OF SERVICE TAX e-payment of taxes e payment of tds epf epf challan epf claim epf e passbook EPF FAQ epf interest exemption epf interest rate epf interest rate for fy 2010-11 epf int rate 11-12 epf limit epfo epf online EPF ONLINE CHALLAN GENERATION epf statement EPF TRUST epf withdrawals equal monthly installments equity funds ER-1 ER-2 er4 form online error in etds return error in st-3 E-SEVA BY ICAI esi esi contribution esi limit 10000 esi limit 15000 esi limit from 01.05.2010 esi return ESOP E STAMP DUTY ETABF ETAX etcs etds e-TDS/TCS statements etds correction etds defualts etds due date ETDS FVU 3.1 ETDS PAYMENT ETDS Q4 ANN II etds return ETDS RETURN DUE DATES etds return less deduction of tax. etds retur with insufficient pan ETDS RTEURN SOFTWARE etds software etds without pan etrip e tutorial for TAN registration Excel EXCEL 280 excel add in EXCEL CII excel form 16 excell add in EXCEL SHORT CUTS excel software EXCESS TDS Exchange-traded fund exci excise excise changes in budget EXCISE FORMS excise notification Excise on branded goods excise on utensils excise rate reduced EXCISE REGISTRATION exclusion from capital asset exempted capital gain exemption limit increased EXEMPTIONS IN FEW SERVICES exice duty on new items EXIDE CASE CALKUTTA HIGH COURT EXPANSION OF EXISTING SERVICE EXPLANATORY NOTES TO FINANCE ACT(2) 2009 export EXTENSIBLE BUSINESS REPORTING LANGUAGE extra level security in credit card facebook face book url face book username fake prize money family pension FAQ faq on fbt on esop FAQ VAT fast facts father can claim for son studies FAX FROM COMPUTER FBT FBT CALCULATOR fbt challan FBT ON ESOP fc(r) ACT fdi in insurance and telecom fd interest rate fdr FEMA FIGURES TO WORDS fii file free etds statement file validation utility Finance finance act Finance Act (2) 2009 finance act 2010 Finance act 2011 FINANCE ACT 2012 finance bil 2012 finance bill(2) 2009 finance bill 2010 finance bill 2011 finance bill in lok sabha finance bill top news Finance Minister finance ministry financial adviser financial crises FINANCIAL PLANNING Financial Services first class rail passenger fare from 01.10.12 first discussion paper on gst first name in pan card first quarter fringe benefit tax adjustment fiscal cliff FIVE IN ONE FIVE IN ONE TAX CALCULATOR Fixed deposit fixed maturity plan FLOW CHART ON FBT ON ESOP fmc fm speech on 07/05/2012 FMV OF ESOP FMV UNLISTED COMPANY ESOP FN 275-192-2009 FOREIGN COMPANT FBT ON ESOP foreign direct investment foreign dividends foreign exchange money changer service tax foreign individual in shares Forex derivatives tax forex trading forget password Form 10E FORM 16 FORM 16A fORM 16aA IN FIVE MINUTES FORM 16A FROM ETDS FVU form 16A from fvu form 16a from nsdl FORM 16A GENRETION SOFTWARE FORM 16A PDF FORM 16 A SOFTWARE form 18 punjab vat act form 26as form 26q form 26q online free form 29C form 49a excel/pdf/online formation of huf forum site FORWARD CONTRACTS ACT 1952 fpo fraud mail free auto filler for epayment of taxes FREE CHALLAN SOFTWARE free e filing Income tax return 11-12 free epayment auto filler of challan free etds return free etds software FREE INCOME TAX ACT free income tax return free itr-1 free itr-2 e filing Free online Books of Direct Tax for F.Y.2008-09 free online greeting card holi free samples FREE SOFTWARE FREE SOFTWARE FOR ETDS FREE TOOLBAR WITH SEARCH Fringe Benefit Tax full partition of huf future and options fvu FVU 2.130 FVU 2.131 fvu 2.216 fvu 3.0 fvu 3.2 fvu 3.3 fvu 3.4 GAAR GAIN ON SALE OF SHARES GAR-7 gas cylinder GAZETTE NOTIFICATION gdp General anti avoidance rule general provident fund generation company GIFT BY NRI gift deed to huf gift from relative gift in kind gift on marriage gift tax gmail Goal calculator gold bond scheme gold deposit scheme GOLD LOAN Gold Monetization Scheme gold silver rates 10 years Goods and Services Tax GOODS TRANSPORT AGENCY ABETMENT goods transport agency service tax GOOGLE SEARCH google tool bar Gopal Kumar kedia got approved from president GOVT NOTIFICATION CST gpf interest rate gpf interest rate 8.6 % gpf interest rate 8.8 % gratuity gratuity limit enhanced Green-channel banking GREETING CARD ONLINE GROSS RECEIPT MEANING 44ab GST GTA guarantee Nav guidelines for selection of cases gujrat vat act half pay leave HAPPY DIWALI HAPPY NEW YEAR HBA-HRA hdfc bank Health care Health insurance health plans health service help on tax HIGHER SECONDARY CESS HIGHER TDS WITHOUT PAN 01.04.2010 HIGH VALUE TRANSACTION HIGH-VALUE TRANSACTIONS HINDU UNDIVIDED FAMILY hiring motor vehicle holi card holiday holiday on election day holidys Home insurance home loab HOME LOAN hospitals house budget house completion house loan 150000 or 30000 house loan and tax svaing house loan at discounted rates house loan on two houses house loan reduuced house property house valuation house wife how to calculate income on salary how to calculate new basic how to calculate new da rate how to claculate income on salary how to file correction statement how to fill date column in punjab vat form 18 HOW TO FILL ITR-2 how to fill tds challan 280 how to invest in Mutual funds how to pay service tax online HOW TO SELECT ITR FORMS How to use atm HRA and house loan