Why in news?
The Ministry of Finance has notified the Capital Gains Accounts (Second Amendment) Scheme, 2025. The changes expand the list of banks authorised to accept deposits under the scheme, allow digital payment modes and clarify procedures for depositing and closing accounts. This update has been widely reported because it modernises a key mechanism used by taxpayers to save on capital gains tax.
Background
Under Sections 54, 54B, 54D, 54F and 54G of the Income‑tax Act taxpayers can defer or avoid capital gains tax if the proceeds from selling property, agricultural land or industrial undertakings are reinvested in specified assets. When there is a time gap between selling and purchasing the new asset, the unspent amount must be kept in a Capital Gains Accounts Scheme (CGAS) account. The scheme, introduced in 1988, designates banks to hold these funds and ensures they are used only for eligible investments. It has largely remained unchanged for decades and was limited to state‑owned banks with paper‑based processes.
What’s new?
- Private banks included: The amendment extends the definition of “deposit office” to include any authorised bank, bringing 19 private sector banks such as HDFC Bank, ICICI Bank and Axis Bank into the network. Earlier only public sector banks could open CGAS accounts.
- Digital payments allowed: Depositors can now fund their accounts through electronic modes including credit cards, debit cards, internet banking, Unified Payments Interface (UPI), Immediate Payment Service (IMPS), NEFT, RTGS and BHIM/Aadhaar Pay. This reduces reliance on cheques and demand drafts.
- Clarified effective date: For deposits by cheque or other instruments, the date of deposit will be the date the payment instrument is received by the bank, regardless of when it is credited. This helps avoid disputes about eligibility for tax exemptions.
- Electronic statements and closure: Account holders may opt to receive quarterly statements via email. From 1 April 2027, the scheme will permit electronic closure of accounts, with the deposit office transferring balances directly to the taxpayer’s bank account after approval from the Assessing Officer.
- Section 54GA added: The list of eligible capital gains has been extended to include Section 54GA, which provides relief when industrial undertakings relocate from urban areas to Special Economic Zones.
Significance
- Modernising tax administration: By embracing digital payments and expanding bank coverage, the scheme aligns with India’s broader push towards a cashless economy.
- Easing taxpayer compliance: Depositors no longer need to travel to government banks or handle physical instruments. Electronic statements and online closure will reduce paperwork and save time.
- Promoting investment: Easier deposits and withdrawals may encourage more taxpayers to reinvest their capital gains in property or business assets rather than paying tax, potentially boosting economic activity.
Conclusion
The updated Capital Gains Accounts Scheme makes it simpler and more convenient for individuals and businesses to temporarily park their sale proceeds. This ensures compliance with capital gains exemption provisions while supporting the government’s objectives of financial inclusion and digital transactions.
Source: CNBC TV18,
