Government Clears HDFC Bank to Accept Capital Gains Deposits
HDFC Bank Enters Capital Gains Deposit Scheme, Giving Property Sellers More Time to Reinvest
People who sell a house, agricultural land or other eligible assets often face a tax deadline before they can complete their next investment. HDFC Bank has now received approval from the Government of India to accept deposits under the Capital Gains Accounts Scheme (CGAS), 1988. The facility gives eligible taxpayers an additional option to hold their unused capital gains in designated savings accounts or fixed deposits while retaining the opportunity to claim tax exemption under the applicable provisions of the Income-Tax Act.
The arrangement is aimed at taxpayers who have sold qualifying assets but have not completed the purchase or construction of another eligible asset before the deadline for filing their income tax returns. Instead of leaving the money outside the prescribed tax arrangement, they can deposit the unutilised amount under CGAS and use it for the purpose allowed by the relevant tax provision.
Under the scheme, the money can remain in a designated account for a maximum period of three years, depending on the nature of the transaction and the applicable tax provision. This gives property sellers and other eligible taxpayers more time to complete their planned investments.
HDFC Bank will offer two types of accounts under the scheme. Account A will operate as a savings account, while Account B will be available as a fixed deposit. Customers can select the account arrangement according to their financial requirements and the expected date of reinvestment.
The Capital Gains Accounts Scheme was introduced by the Central Government in 1988 to help taxpayers who wish to claim tax benefits but cannot complete the required investment within the initial period. Under the Income-Tax Act, certain exemptions are available when capital gains from the sale of specified assets are reinvested in eligible properties or other permitted assets.
For instance, Section 54 of the Income-Tax Act, 1961, provides tax relief in eligible cases involving the sale of a residential house and investment in another residential property. Section 54B covers certain gains from the transfer of agricultural land when the proceeds are used to purchase other agricultural land. Section 54F deals with eligible capital gains arising from the transfer of assets other than residential houses, subject to prescribed conditions.
Where the taxpayer has not used the eligible amount before the income tax return filing deadline, the CGAS facility allows the money to be deposited with an authorised bank. The deposit must be made within the prescribed deadline, generally on or before the due date for filing the return under Section 139(1).
The tax exemption depends on the conditions of the relevant section. Depositing money in a CGAS account does not provide an unconditional or permanent tax exemption. The account holder must use the funds for the permitted investment within the time allowed under the applicable provision. If the money remains unused after that period, the amount may become taxable as capital gains in the relevant financial year.
HDFC Bank’s new facility covers several categories of asset transfers. These include residential houses, apartments, buildings and land, agricultural land, and capital assets other than residential property. The scheme also covers land or buildings forming part of an industrial undertaking when transferred through compulsory acquisition.
Industrial businesses shifting from urban locations to non-urban areas can also use the facility for eligible gains arising from the transfer of plant, machinery, land or buildings. Similar provisions apply to certain industrial assets relocated from urban areas to Special Economic Zones (SEZs).
The bank will make the facility available through its urban and semi-urban branches across India. Rural branches will remain outside the arrangement. According to the bank’s announcement, resident Indians can use the deposit facility, subject to the conditions of the applicable tax provisions.
Customers will be able to transfer money through National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS), Immediate Payment Service (IMPS), Unified Payments Interface (UPI) and other permitted fund transfer services. Deposits can be made in one payment or in instalments before the applicable income tax return filing deadline.
The savings account will have a zero-balance requirement and no transaction charges. Both savings account holders and fixed deposit customers will receive interest on their deposits. The bank has also provided for quarterly interest payments under the facility.
Account holders will have view-only access through HDFC Bank’s Net Banking and Mobile Banking services. This means customers can check their account details online, although they will not be able to carry out transactions through these digital channels. Savings account holders will receive passbooks, while fixed deposit customers will receive deposit advice to keep track of their deposits.
The bank’s arrangement also comes with certain restrictions because CGAS accounts operate under specific government rules. Customers must follow the prescribed withdrawal and reinvestment procedures. The money cannot be treated as an ordinary savings balance that can be used freely for personal expenses. Interest earned on deposits is also subject to applicable income tax and tax deduction rules.
Commenting on the government approval, Ms Sunali Rohra, Head – Government & Institutional Liabilities, New Economy Group and Alternate Banking Channels & Partnership, HDFC Bank, said, “We are grateful to the Government of India for reposing faith in us as a reliable partner for implementing the CGAS. With this offering, customers can both earn interest and avail tax exemption on their unutilised capital gains. We invite customers to leverage our extensive branch network and digital prowess to securely park their unutilised capital gains.”
The addition of HDFC Bank gives eligible taxpayers another banking option for managing money received from the sale of assets while they complete their planned reinvestment. The facility may be particularly useful for people selling residential property, agricultural land and certain industrial assets, where finding a suitable replacement property or completing a new investment can take time.
Taxpayers considering the scheme should check the conditions of the relevant tax section before opening an account. The permitted investment, deposit deadline and period for using the money differ according to the asset sold and the nature of the exemption claimed. A chartered accountant or tax adviser can help determine the amount eligible for deposit and the deadline for reinvestment.
For HDFC Bank, the government approval adds a new deposit category to its banking services. For eligible taxpayers, it provides another route to keep unutilised capital gains in a regulated bank account while completing the investment required to claim tax relief.
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