Since the presentation of the Union Budget 2024, capital gains tax has been the most discussed topic in the country. Whether it is real estate, gold or stocks, you have to pay capital gains tax on all gains. The government has also created many formulas to calculate this type of tax and many types of tax exemptions are also given to the taxpayers. One of these options is the Capital Gain Account Scheme (CGAS). This particular type of account is opened to avoid taxes on capital gains, regardless of the category of your capital gain.
According to the Income Tax Act, capital gains i.e. gains from real estate or gold must be reinvested within the prescribed period in the options suggested by the government to avoid taxes. Most investors know that they have to reinvest their capital gains, but very few know about this account. Here’s how it works and how to open it.
The government first introduced this type of account in 1988. As we have already mentioned, the Income Tax Act requires you to reinvest your capital gains within the prescribed period to save tax. So, if you deposit that amount in the CGAS account, it will come under the tax exemption. Of course, if you do not invest and do not deposit in this account, capital gains tax will be levied on the profit you make.
Under sections 54, 54B, 54D, 54F, 54G and 54GA of the Income Tax Act, investors have the opportunity to save capital gains tax. This section provides tax exemption on profits if they are reinvested within the stipulated period and it is assumed that you have not yet made a profit and your money is still invested. It is obvious that if you miss the deadline, you can suffer a huge loss. If you want to avoid this loss, you can deposit money in the CGAS account. However, it should be noted that not more than 10 million can be deposited in this account.
The CGAS account can be opened at any branch of any line bank, including SBI. The money can be deposited in cash, cheque, DD or any other means. Banks open accounts in two ways. A Type A account is treated like a savings account and the interest on it is the same as on a savings account. A Type B account, on the other hand, works like an FD. You get the same interest on it as on an FD but the lock-in period is fixed and can be a maximum of 3 years.
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