deduction u/s. 54 B

[rajasthani7]

Whether Fixed Deposit are eligible for cliaming deduction u/s.54B ?

[ashutosh majumdar]

S. 54B(2) reads as follows:

(2) The amount of the capital gain which is not utilised by the assessee for the purchase of the new asset before the date of furnishing the return of income under section 139, shall be deposited by him before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139] in an account in any such bank or institution as may be specified in, and utilised in accordance with, any scheme which the Central Government may, by notification in the Official Gazette, frame in this behalf and such return shall be accompanied by proof of such deposit; and, for the purposes of sub-section (1), the amount, if any, already utilised by the assessee for the purchase of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset :

Provided that if the amount deposited under this sub-section is not utilised wholly or partly for the purchase of the new asset within the period specified in sub-section (1), then,—

           (i)  the amount not so utilised shall be charged under section 45 as the income of the previous year in which the period of two years from the date of the transfer of the original asset expires; and

          (ii)  the assessee shall be entitled to withdraw such amount in accordance with the scheme aforesaid.

The Govt has framed the Capital Gains Account Scheme, 1998 for the above purpose. I found a nice write up on the CGAS at mumbaipropertyexchange.com which reads as follows:

Question 6.

What Is Capital Gains Account Scheme?

Answer 6.
If you get long term capital gains , Income Tax Act provides certain exemptions under section 54,54B,54D,54F and 54G .In short these exemption are for capital gains earned on account of

Sale of a residential house (Sec 54)
Sale of agricultural land (Sec. 54B)
Compulsory acquisition of land & building (Sec. 54D)
Sale of any long term capital asset (Sec. 54F)
Transfer of assets in case of shifting of industrial undertaking. (Sec 54G)


In all these cases, an assessee is given exemption if the sale proceeds are utilised for some specific purpose. But it happens that the money can not be utilised within short span of time. In that case, there is provision that the money is deposited in designated bank in a special kind of account called Capital Gains Account Scheme and utilise the money for that specific purpose within extend period given in those section.

Therefore , all those assessees who are eligible for exemption u/s 54, 54B, 54D, 54F & 54G are eligible for applying for accounts under Capital Gains Account Scheme.

What are types of deposits under CGAS ?

There are two types of accounts:

Deposit Account-A - This is a saving account.

Deposit Account-B- This is a term deposit account.

Where can I open this account?

You can open this account in any State Bank of India or any bank which is authorised for this scheme. You will have to fill up and submit the Form A in the bank and deposit the money in the account.

What will be the date of deposit in case of deposit of money by cheque?

In case the money is deposited by cheque or draft , the money is realised by the bank even after the date , the effective date for the purpose of counting period given in the provision for exemption will be the date on which the cheque was given to bank.

Can I withdraw money from these accounts ?

Yes, from savings account , you can withdraw by filing Form C with the Bank. However, in case of withdrawal other than initial withdrawal, you will have to submit Form D to the Bank in duplicates.

In case , you want to withdraw from Account Type-B , it will first have to be converted into Type A by filing Form B and then all the methods of withdrawal of money from account A shall follow.

What is the rule regarding the utilisation of the amount of withdrawal?

The amount withdrew has to be spent only for the purpose for which it was deposited as per respective provision under which capital gains arisen. There is also time limit of sixty days from the date of drawl within which it has to be spent. The balance if any , has to be deposited in the bank.

How can I close this account?

Closure By depositor : The depositor will get the approval from his assessing officer in Form G and submit it to the bank.

Closure by nominee: Seek the approval of the assessing officer in Form H who has jurisdiction over deceased depositor and submit to bank.

Closure by legal heir: Seek the approval of the assessing officer in Form H who has jurisdiction over deceased depositor and submit to bank and also submit the disclaimer by other heirs .

Remember however, if there is more than one heir , the assessing officer will give approval only after getting the a succession certificate or a probate of a will or a letter of administration to the estate of the deceased.

So, simple fixed deposit account will not do.

Regards,

Ashutosh