Definition
Capital Gains Account Scheme
The Capital Gains Account Scheme lets taxpayers park capital gains in a designated bank account to retain tax exemption until they reinvest in a specified asset.
Tax law exempts certain capital gains if they are reinvested, for instance in a new house, within a time limit. If a taxpayer has not reinvested by the return-filing deadline, the Capital Gains Account Scheme lets them deposit the gain in a special bank account to keep the exemption alive until the reinvestment is made within the allowed window.
The deposited amount must be used for the intended purpose within the prescribed period, failing which it becomes taxable. The scheme bridges the timing gap between earning a gain and completing a qualifying reinvestment.
Related terms
- Small Savings SchemesSmall savings schemes are government-backed savings instruments such as PPF, NSC and Sukanya Samriddhi that channel household savings into the Public Account.
- Advance TaxAdvance tax is income tax paid in instalments during the financial year as income is earned, rather than in a lump sum after the year ends.
- Set-Off and Carry Forward of LossesThese rules let taxpayers adjust losses against income of the same or future years, subject to conditions on the type of loss and how long it can be carried forward.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.