A guide to Capital Gains Account Scheme for NRIs

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Non-Resident Indians (NRIs) need to plan their finances across India and their home country. While managing money abroad may get most of your attention, financial matters in India can sometimes be overlooked, especially when you do not spend much time here. Profits earned from sale of Capital assets in India such as real estate, shares, etc., are classified as capital gains. These earnings, while beneficial for your goals, are subject to tax regulations under Income Tax act.

The Capital Gains Accounts Scheme (CGAS) is a government scheme that allows taxpayers, including NRIs, to temporarily park capital gains in a designated account to claim tax exemptions under certain conditions.  

If you are eligible for exemption under certain specified sections of the Income tax Act listed below, you may open CGAS account/deposit with an authorised bank such as ICICI Bank.

Specified Sections:

• Section 54: Exemption from the capital gains arising from the transfer of residential house property and investment in new house property
• Section 54B: Exemption from the capital gains arising from transferring land used for agricultural purposes and investing in new agricultural land*
• Section 54D: Exemption from the capital gains arising from the compulsory acquisition of land and building, forming part of the industrial undertaking and investing in land or building for setting up or shifting of the industrial undertaking
• Section 54F: Exemption from the capital gains arising from the transfer of a long-term capital asset other than a house property and investing in a residential house property
• Section 54G: Exemption from the capital gains arising from the transfer of assets on shifting of industrial undertaking from the urban area to a non-urban area
• Section 54GA: Exemption from the capital gains arising from the transfer of assets on shifting of industrial undertaking from the urban area to any SEZ

*Sale proceeds of agricultural property/farmhouse/plantation purchased or acquired by way of gift by NRI cannot be credited in this account.

*NRI cannot purchase agricultural property/farmhouse/plantation from this account.

Your funds are temporarily parked in the account while you get to claim a tax exemption. However, you must use the deposited amount within the prescribed time limit under the relevant section. If not, the unused amount becomes taxable.

Features of CGAS

• Two types of CGAS accounts: You can open either a savings account (Type A) or a term deposit account (Type B) under CGAS at authorised bank branches
• Tax exemption: Deposit un-invested capital gains or sale proceeds before the ITR due date to claim on capital gains exemption under relevant Income Tax sections
• Temporary parking of funds: The scheme allows you to temporarily park your capital gains for up to two years, in case of purchase of a property and three years in case of construction of an new property, while you plan your reinvestment
• Interest on Capital Gain Account Scheme: Your deposit earns interest similar to regular savings account or fixed deposits
• Access and support: You can manage the account through designated bank branches and customer support

To know more, visit https://www.icici.bank.in/personal-banking/accounts/capital-gains-account-scheme

How does CGAS benefit NRIs?

CGAS helps you claim tax exemption if you have not been able to reinvest your capital gains before the ITR filing due date. It also supports financial planning in India. Your deposit earns a steady CGAS scheme interest rate based on the account type you select.

The proceeds can later be invested in, residential property or other capital assets of an industrial undertaking in non-urban areas or SEZs.

Eligibility

• You must be an earning capital gains from capital assets in India
• You must open the account with an authorised bank, such as ICICI Bank
• You must deposit capital gains into a CGAS account before your ITR filing deadline

Important considerations

• The scheme allows only temporary parking of funds. You must reinvest the amount within the prescribed time limit under the applicable section
• You should consult a tax advisor to ensure you meet all conditions

Disclaimer:

The contents of this article/infographic are meant solely for informational purposes. The contents are generic in nature and are not intended to serve as a substitute for specific advice on any matter whatsoever. The information is subject to updation, completion and verification and the applicable norms may keep changing materially from time to time. This information is also not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to applicable laws or would subject ICICI Bank Limited/its affiliates to any licensing or registration requirements. ICICI Bank Limited/its affiliates and their representatives shall not be liable for any direct or indirect losses or liability incurred arising in connection with any decision taken by any person on the basis of this content. Please conduct your own due diligence and consult your financial advisor before making any decision. Terms and conditions of ICICI Bank and third parties apply. ICICI Bank is not responsible for third party services. Nothing contained herein shall constitute or be deemed to constitute an advice, invitation or solicitation to avail any products/ services of third parties.