ICICI Bank has announced the launch of the Capital Gains Account Scheme (CGAS). It is a facility that allows taxpayers to deposit unutilised long-term capital gains or sale proceeds and earn interest on the deposited amount, along with claiming tax deductions.

The facility was launched after the government approved ICICI Bank as an authorised institution to accept deposits under the Capital Gains Account Scheme.

Extra returns for senior citizens

The scheme, effective from 1st of this month, is available to individuals and Hindu Undivided Families (HUFs) residing in the country. The bank said that the facility will be extended to non-individual entities and Non-Resident Indians (NRIs) in the future.

This CGAS scheme is particularly suitable for taxpayers who are unable to reinvest their long-term capital gains in eligible assets before the last date of filing of Income Tax Return (ITR), but still want to claim tax deduction as per the Income Tax Act. By depositing the gains in a specific CGAS account, taxpayers can maintain their tax deduction eligibility for up to three years, subject to the reinvestment conditions.

Customers can open a Capital Gains Account by visiting any ICICI Bank branch, except rural branches, as per the Capital Gains Account Scheme rules.

“We thank the Government of India for recognizing ICICI Bank as an approved institution for Capital Gains Account Scheme deposits. Through this scheme, customers can deposit uninvested long-term capital gains, earn interest and plan for reinvestment for up to three years, while also claiming tax deduction. This service further strengthens our commitment to providing financial solutions to meet the growing needs of customers.”

Under this scheme, customers can opt for two types of accounts. Type A accounts, which, like savings accounts, allow flexible withdrawal of funds for permitted reinvestment purposes. Type B accounts, which act like term deposits and can be opened for a specified period in either a compounding or non-compounding format.

The funds deposited before the last date of filing of income tax returns can be used to claim tax exemption on long-term capital gains as per the relevant provisions of the Income Tax Act. The deposited funds can be kept temporarily for up to three years, during which time the taxpayers can plan for reinvestment without losing the benefit of tax exemption. The interest earned on these accounts is similar to the interest rate on regular savings accounts or fixed deposits, depending on the type of account. As per the applicable CGAS provisions, the money can later be reinvested in eligible assets such as residential properties, agricultural land, or new capital assets of industrial establishments in non-urban areas or special economic zones. Withdrawals are permitted subject to proof of use for specific purposes.

For taxpayers who face delays in reinvestment of capital gains, CGAS provides a structured way through which the funds can be held with interest till final utilisation and at the same time tax benefits can be maintained.

Exemption from Capital Gains Tax

As per the Income Tax Act, taxpayers can save long-term capital gains tax by reinvesting the proceeds of sale under certain sections like Section 54 (Sale of residential house), Section 54F (Sale of property other than house), Section 54B (Sale of agricultural land), Section 54EC (Investment in advertised bonds), and Section 54D (Compulsory acquisition of industrial land or building). If reinvestment is not possible before the due date for filing of income tax return, the unused amount can be deposited in a Capital Gains Account Scheme (CGAS). This deposit is considered a valid reinvestment for tax purposes, which allows the taxpayer to claim a timely deduction if the fund is ultimately used within a specified period—which is usually two to three years, according to the section.