Capital Gains Account Scheme was introduced in 1988. Capital Gains Account Scheme allow taxpayer to depositing unutilised capital gains in ‘Capital Gains Account’ introduced under Capital Gains Account Scheme.

Capital gain invested in Capital Gains Account Scheme will be eligible for capital gain exemption as it would in case of re-investment.

Taxpayer who are claiming exemption of Capital Gain under 54, 54B, 54D, 54E, 54F, 54G or 54GB can invest in this scheme. Details as below:

Section Number	Capital gains made on	Category of person
54	Sale of residential house	Individual or HUF
54B	Sale of land used for agricultural purpose	Individual or HUF
54D	Compulsory acquisition of land and building	Any taxpayer
54E	Sale of any long term capital asset	Any taxpayer
54EC	Sale of long term capital asset being land or building or both	Any taxpayer
54F	Sale of any long term capital asset not being residential property	Individual or HUF
54G	Transfer of asset (machinery, plant or building, land or right in land or building) in case of shifting of industrial undertaking from urban area	Any taxpayer
54GA	Transfer of asset/s (machinery, plant or building, land or right in land or building) in case of shifting of industrial undertaking from urban area to Special Economic Zone	Any taxpayer
54GB	Transfer of residential property	Any taxpayer

Rules of Capital Gain Account Scheme, 1988

Rule- 1

1. This Scheme may be called the Capital Gains Accounts Scheme, 1988.

2. It applies to all assessee who are eligible for exemption under section 54, 54B, 54D, 54F, 54G or 54GB of the Income-tax Act, 1961 (43 of 1961).

Rule- 2: Some Definition

1.“Deposit Office” means any branch or branch office of the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955) or of a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), or of a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970) or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), authorised by the Central Government, by notification in the Official Gazette, to receive deposit and maintain account of the depo-sitor, under this Scheme;

2.  “depositor” means an assessee who is eligible to make a deposit under section 54, 54B, 54D, 54F, 54G or an eligible company as referred to in section 54GB of this Act;

Rule- 3: Deposits how to be made

A deposit or deposits may be made under the provisions of section 54 or section 54B or section 54D or section 54F or section 54G or section 54GB of the Act by any depositor intending to avail of the benefit under the said section or sections of the Act, as the case may be, in accordance with the provisions of this Scheme.

Rule- 4: Types of deposits

(1) There shall be two types of deposit accounts, namely :—

          (i )  “Deposit account-A”- Savings Deposit- withdrawals under this account can be made from time to time by the depositor.

         (ii )  “Deposit account-B”- Terms Deposit (cumulative or non-cumulative ) – withdrawals under this account can be made only after the expiry of the period for which the deposit under this account has been made and accepted.

 (4) Such deposits may be made in one lump sum or in instalments at any time on or before the due date of furnishing the return of income under sub-section (1) of section 139 of the Act as is applicable in the case of the depositor or the eligible assessee as referred to in section 54GB.

Rule- 5: Application for opening account

(1) Every depositor shall apply to the deposit office in Form A

(2) While applying under sub-paragraph (1) the depositor shall exercise his option as to whether the amount is to be deposited in account-A or in account-B or in both the accounts.

(3) On receipt of an application under sub-paragraph (1), the deposit office shall open an account or accounts in the name of the depositor as opted by him under sub-paragraph (2).

(4) The payment of amount of deposit shall be made by the depositor either in cash or by crossed cheque or by draft along with the application.

(5) Every subsequent deposit shall be made into the deposit office at which the account stands, in the same manner as stipulated in sub-paragraph (4).

Rule- 6: Issue of duplicate pass book or receipt

In the event of loss or destruction of the pass book receipt referred to in sub- paragraph (8) or sub-paragraph (9) of paragraph 5, the deposit office may, on an application made to it in this behalf, issue a duplicate thereof.

Rule- 7: Transfer and conversion of the account

(1) A depositor may, if he so desires, apply for transfer of his account or accounts, from one deposit office to another deposit office of the same bank.

(2) A depositor having a deposit in account-B may, at any time, if he so desires, apply in Form-B for transfer of the amount standing to his credit in account-B to his deposit in account-A opened under the same section of the Act under which the said account-B was opened and the request of the depositor may be accepted subject to the other provisions of this Scheme.

Rule- 8: Interest

(1) Interest at such rate as may be specified by the Reserve Bank of India, from time to time, shall be allowed for each calendar month on the lowest balance at the credit of a depositor under account-A, between the close of the 10th day and the end of the month and shall be credited to the account at the end of each half-year.

(2) Interest at such rate, as may be specified by the Reserve Bank of India, from time to time, shall be allowed in respect of deposit in account-B. In case of cumulative deposit in account-B, the amount of interest accrued will be deemed to have been reinvested and in case of non-cumulative deposit in account-B, the amount of interest will become due and payable at quarterly intervals.

Rule- 9: Withdrawal from the account

(1) Deposit account-A- Savings Deposit- withdrawals under this account can be made from time to time by the depositor.

(2)Deposit account-B- Terms Deposit (cumulative or non-cumulative ) – withdrawals under this account can be made only after the expiry of the period for which the deposit under this account has been made and accepted.

Explanation : For the removal of doubts, it is hereby clarified that the deposit office shall refuse the depositor to withdraw any amount lying in his account, in case of failure on his part to furnish all the details as required by sub-paragraph (3).

Rule- 10: Utilisation of the amount of withdrawal

(1) A depositor, withdrawing any amount out of the deposit shall utilise the whole or any part of the amount so withdrawn for the purposes specified of the section in relation to which the deposit has been made.

(2) The amount withdrawn shall be utilised by the depositor within sixty days from the date of such withdrawal for the purposes specified in sub-paragraph (1) and the amount or any part thereof which has not been so utilised shall be re-deposited in account-A immediately thereafter.

Rule- 11: Nomination by the depositor

A depositor may nominate in Form E one or more persons but not exceeding three to receive the amount standing to his credit in the event of his death before the amount has become payable or having become payable, has not been paid.

Rule- 12: Charge or alienation

The amount standing to the credit of any depositor in any account shall not be placed or offered by him as security for any loan or guarantee and shall not be charged or alienated in any manner whatsoever.

Rule- 13: Closure of the account If a depositor other than an eligible company as referred to in section 54GB desires to close his account, an application shall be made with the approval of the Assessing Officer who has jurisdiction over the depositor to the deposit office in Form G or as near thereto as possible, and the deposit office shall pay the amount of balance including interest accrued, to the credit in the account of the depositor by means of crediting such amount to any bank account of the depositor.