Tax Treatment of Interest received from Capital Gain Deposit Account Scheme !!

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The tax treatment of interest of capital gain account scheme is cover by Rule 8 of the Capital Gain Deposit. Account Scheme-1988 which reads as under:

Interest.

  1. (1) Interest at such rate as may be specify by the Reserve Bank of India. From time to time, shall be allow for each calendar month. On the lowest balance at the credit of a depositor under account-A, between the close of the 10th day and the end of the month and shall be credit to the account at the end of each half-year.

(2) Interest at such rate, as may be specify by the Reserve Bank of India, from time to time, shall be allow in respect of deposit in account-B. In case of cumulative deposit in account-B, the amount of interest accru will be deem to have been reinvest and in case of non-cumulative deposit in account-B, the amount of interest will become due and payable at quarterly intervals.

(3) Interest due at the end of each half year in respect of account-A will be credit only when the amount is Re. 1 or more and the total amount of interest payable in respect of account-A or account-B will be round off to the nearest five paise.

(4) If a depositor applies under paragraph 7 or paragraph 9 or paragraph 13 for conversion of the account or withdrawal from the account or closure of the account, as the case may be, before completion of the period for which the deposit in account-B has be accept by the deposit office.

The rate of interest payable in respect of such deposit shall be the one applicable. To the period for which the deposit remain. With the deposit office less one per cent penalty for a premature. Withdrawal on account of such conversion or withdrawal or closure. As the case may be. And any adjustment required to be made on account of such premature conversion. Withdrawal or closure with respect to amount of interest already credited to the account. Of the depositor, shall be made by the deposit office against the amount. Lying to the credit of the depositor in account-B.

In short, the interest of CGDAS is taxable !!

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