Outlook Business Desk
Capital gains, whether long-term (LTCG) or short-term (STCG), can be a concern for those planning to sell their assets—such as stocks, mutual funds, property, gold, or other investments. Under current tax regulations, the rate can be as high as 12%.
To help reduce this tax burden and encourage the reinvestment of capital gains from the sale of capital assets, the Indian government provides a structured method to defer capital gains tax on the sale of land and property. This is known as the Capital Gains Account Scheme (CGAS).
The Capital Gain Account Scheme (CGAS) allows you to securely park long-term capital gains from the sale of specified assets for up to 3 years preventing immediate taxation.
This scheme is particularly beneficial for individuals who plan to reinvest their capital gains in specified assets, such as residential properties, but are unable to do so before the deadline for filing their Income Tax Returns (ITR).
To minimise income tax on long-term capital gains from assets the most effective strategies is to utilise Section 54, Section 54F or Section 54EC of Income Tax Act depending on your specific eligibility.
Section 54 exempts tax by reinvesting gains from a sold house into another. Section 54F allows tax savings by using proceeds from any asset (except a house) to buy home. Section 54EC offers exemption by investing in bonds.
Under Section 54, residential house must be purchased within 1-year before or 2 years after the sale. Section 54F requires the new house to be bought within the same timeline or constructed within 3 years and in Section 54EC investor must invest in bonds within 6 months from the sale of property.
As per the experts, the CGAS scheme applies only to Indian residents while non-residents must open a Non-Resident CGAS (NRCGAS) account. The NRCGAS is designed for Non-Resident Indians (NRIs) to defer capital gains tax liabilities arising from the sale of assets in India.