Capital Gains Account Scheme: Save Tax on Property Sale Money

You sold your flat in March, the buyer paid, and the long-term capital gain is large. To save tax under Section 54 you must reinvest that gain in another house. But the right property has not turned up, and your return due date (31 July for most individuals) is racing toward you. Miss the reinvestment and miss the deadline, and the whole gain becomes taxable. The Capital Gains Account Scheme, 1988 is the parking spot the Income Tax Act built exactly for this gap.

The Capital Gains Accounts Scheme, 1988 is a Central Government scheme that lets you deposit an unutilised capital gain in a designated bank account and still keep your reinvestment exemption. You claim the exemption in the current year, park the money, and reinvest within the legal window. It bridges the timing gap between selling an asset and buying the replacement.

The scheme supports the reinvestment exemptions under several sections of the Income Tax Act, 1961, including Section 54 (residential house), Section 54B (agricultural land), Section 54D, Section 54F (any long-term asset reinvested in a house) and others. The rule is the same across them: if you cannot complete the reinvestment before your return due date, deposit the unused amount in CGAS by that date.

Consider Dr. Shrawan Kumar Pathak. He sold a plot in October and earned a long-term capital gain of around 40 lakh. He plans to build a house to claim Section 54F, but construction will take more than a year, well past his 31 July return due date.

If he files claiming the exemption but leaves the gain in his normal savings account, the Assessing Officer can deny the exemption later. The correct move is to deposit the unutilised gain into a CGAS account before 31 July and reinvest from that account over the next three years.

You need CGAS when all of the following are true:

1. You have a capital gain eligible for a Section 54 / 54B / 54D / 54F type exemption.
2. You have not yet completed the reinvestment (purchase or construction).
3. Your return filing due date under Section 139(1) is approaching.

1. Pick an authorised bank. CGAS accounts are opened at branches of authorised banks notified under the scheme (for example SBI, PNB, Bank of Baroda and others). Ask the branch to confirm it offers CGAS before you go.
2. Fill Form A. This is the application form to open the account, submitted in duplicate. Carry it along with your PAN, identity and address proof, and the photograph the bank asks for.
3. Choose the account type (Type A or Type B, explained below) based on when you expect to reinvest.
4. Deposit the unutilised gain. Deposit by cheque, draft, or transfer. You may deposit in instalments, but the full eligible amount should be in before the deadline.
5. Deposit before your return due date. The deadline is the earlier of your Section 139(1) due date (31 July for most individuals and HUFs) or the date you actually file the return. Miss this date and you lose the right to use CGAS for that gain.
6. Keep the proof. Retain the deposit receipt and account details; you will quote them while claiming the exemption in your return.

You deposit only the unutilised portion of the gain, not the entire sale value (the exact amount depends on which section you are claiming).

The scheme offers two account types, and you can hold both.

A practical approach: if you will buy within months, keep funds in Type A for easy access. If reinvestment is a year or more away, Type B earns more like an FD. You can convert between the two using the conversion form (Form B).

When you find the property, you withdraw from the account to pay for it.

1. First withdrawal is made on Form C.
2. Every later withdrawal is made on Form D, where you explain how the previous withdrawal was used.
3. Use the withdrawn amount within 60 days for the intended purchase or construction. Any portion not used within 60 days should be re-deposited into the Type A account.
4. Withdrawals above a threshold set by the scheme are paid by account-payee instrument rather than cash, so keep a clean paper trail.

Match every rupee you withdraw to a payment for the new asset. That same paper trail is what defends you if the capital gains exemption is later questioned in an income tax notice.

You cannot simply walk in and shut a CGAS account. Closure needs your Assessing Officer's sign-off.

1. Complete the reinvestment (or reach the end of the permitted period).
2. Submit Form G, the closure application, with the approval of the Assessing Officer of your jurisdiction.
3. The bank releases the balance only after that approval is in order.
4. If the depositor has died, the nominee or legal heir uses the separate nominee-closure form (Form H).

The AO-approval step lets the department confirm whether the money was actually reinvested or has become taxable. Keep your purchase deed, construction bills and withdrawal forms ready when you approach the AO.

The exemption is conditional, not permanent. The reinvestment windows under Section 54 are:

1. 2 years from the sale to purchase a residential house.
2. 3 years from the sale to construct a residential house.

If the amount in the CGAS account is not used within the applicable window, the unutilised amount is treated as long-term capital gain in the year the period expires, and you pay capital gains tax on it then. CGAS buys you time, not a permanent escape: the clock that started on the date of sale keeps running whether or not the money sits in the bank.

The deposit, withdrawals and interest all leave a trail in your annual statements. If figures ever look off, reconcile them the way you would handle any AIS and Form 26AS mismatch on a property sale before you file.

For a deeper plain-language walkthrough of citizen money and tax rights, see The RTI Playbook.

By the earlier of your income tax return due date under Section 139(1) (31 July for most individuals and HUFs) or the date you actually file the return. If that date passes without a deposit, you cannot use CGAS to protect that gain.

No. It must be a branch of a bank authorised under the scheme, such as SBI, PNB or Bank of Baroda. Confirm with the branch that it offers CGAS accounts before you apply.

Type A is a savings-style account you can withdraw from any time, suited to a near-term reinvestment. Type B is a term deposit, like a fixed deposit, that earns more but is locked for a term and must be moved to Type A before premature withdrawal.

The unutilised amount in the account becomes long-term capital gain in the year the reinvestment period expires (2 years for purchase, 3 years for construction), and you pay capital gains tax on it in that year.

Closure is done on Form G with the Assessing Officer's approval so the department can verify whether the deposited gain was actually reinvested or has become taxable. The bank releases the balance only after that approval.

No. It supports several reinvestment exemptions, including Section 54 (house sale), Section 54F (any long-term asset reinvested in a house), Section 54B (agricultural land) and others. The common rule is that you deposit the unutilised gain before your return due date.

1. Work out your exact unutilised capital gain and confirm which section (54, 54F, 54B and so on) applies.
2. Open the CGAS account with Form A at an authorised public sector bank before your Section 139(1) due date.
3. Choose Type A or Type B based on how soon you expect to reinvest.
4. Withdraw using Form C and Form D, and use each withdrawal within 60 days.
5. Track the 2-year and 3-year clocks from your sale date; close with Form G and AO approval once you reinvest.
6. If you are also a senior citizen looking to park money safely, compare options such as the Senior Citizen Savings Scheme.

When in doubt about your own numbers, confirm the rules on the official income tax portal at incometax.gov.in or with your bank's CGAS desk before you deposit.