Income Tax Act, 1961 provides certain exemption on capital gain income earned vide section 54, 54B, 54D, 54F, 54G and 54GA. These exemptions are given subject to the condition that the capital gains earned have to be utilised for some specific purpose within the specified period. In case, the amount is not utilised before the due date of filing the return of income then the amount shall be deposited in the Capital Gains Deposit Account Scheme with a nationalised bank. Further, utilise the money for that specific purpose within extend period given in those section.
The scheme is applicable to all assessees having capital gains and the deposits may be made in lump sum or in instalments at any time but, the amount should be deposited in the Capital Gains Account Scheme on or before the due date of furnishing the return of income.
The proof of deposit should be submitted along with return of income. On the basis of actual investment and the amount deposited in the deposit account, exemption will be given to the taxpayer.
If the amount deposited is not utilised wholly or partly for that specific purpose within the period specified in those section, then the unutilised amount will become chargeable to tax in the previous year in which the specified time-limit expires. It will be taxable as short-term/long-term capital gain depending upon the original capital gain. The unutilised amount can be withdrawn by the taxpayer after the expiry of the aforesaid time-limit.
Further, there are two types of accounts under this scheme. One is deposit account A, which is savings account. Second one is deposit account B which is term deposit account. The amount withdrawn should be utilised for the purpose within sixty days of the withdrawal. Any unutilised amount should be redeposited in Deposit Account A.