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Income Tax · Capital gainsCapital Gains Account Scheme: deposit, withdrawal and compliance
Sold a property but have not bought the new house yet? The Capital Gains Account Scheme lets you keep your exemption alive by depositing the money in a designated bank before the return due date. Here is how it works, step by step.
Sections 54 and 54F give exemption if you buy a house within two years or construct within three years of the sale. But the return for the year of sale is due much earlier. To bridge this gap, the Capital Gains Account Scheme, 1988 (CGAS) lets you deposit the unutilised amount in a designated bank account before the return due date and claim the exemption immediately.
Who uses CGAS
- Individuals and HUFs claiming Section 54 (house to house), 54F (other asset to house), 54B (agricultural land) or similar exemptions.
- The 2025 Act carries the same mechanism for Sections 82 and 86.
- Not for 54EC bonds – those must be bought within six months; CGAS does not help there.
The deadline
The deposit must be made on or before the due date of filing the return under Section 139(1) for the year of transfer. For a salaried person who sold a house in FY 2025-26, that is 31 July 2026 (or any extended due date). If you file early, deposit before filing.
Account A and Account B
| Account A (savings) | Account B (term deposit) | |
|---|---|---|
| Nature | Savings deposit, cheque book/passbook | Fixed deposit, cumulative or non-cumulative |
| Use | Funds needed soon – builder instalments, construction | Funds needed later |
| Interest | Savings rate | FD rate |
| Withdrawal | Form C; next withdrawal after accounting for previous use | Transfer to Account A first, then withdraw |
Forms
| Form | Purpose |
|---|---|
| Form A | Opening / deposit |
| Form B | Conversion from one account type to another |
| Form C | Withdrawal from Account A (first withdrawal) |
| Form D | Subsequent withdrawals, with details of use of earlier withdrawal |
| Form G | Closure (with approval of assessing officer) |
| Form H | Closure by nominee / legal heir |
Withdrawn money must be used for the house within 60 days; keep bills and builder receipts.
Worked example
Example: Mr Nanda sells a flat in Shalimar Bagh in December 2025 with LTCG of ₹45,00,000. By 31 July 2026 (due date) he has paid ₹15,00,000 to a builder for a new flat under construction in Rohini.
| Step | Amount |
|---|---|
| LTCG | ₹45,00,000 |
| Invested by due date | ₹15,00,000 |
| Deposit in CGAS by 31 July 2026 | ₹30,00,000 |
| Exemption claimed in return for FY 2025-26 | ₹45,00,000 |
| Taxable LTCG | Nil |
He keeps ₹10,00,000 in Account A for the next two builder instalments and ₹20,00,000 in Account B. By December 2028 (three years from sale), suppose only ₹25,00,000 of the ₹30,00,000 has been used because the flat cost less.
- Unused ₹5,00,000 becomes taxable as LTCG in FY 2028-29, at the rate applicable to LTCG, along with interest earned (taxable yearly as other income).
- He then closes the account with the assessing officer's approval.
Interest on CGAS
Interest earned in CGAS is taxable every year as income from other sources. It is not part of the exempt amount.
Death of the depositor
If the depositor dies before using the money, the unutilised amount is not taxable in the hands of the legal heirs (it is treated as part of the estate). Heirs close the account using Form H.
Practical tips
- Open the account at a branch that actually handles CGAS – call ahead.
- Deposit by cheque or transfer, and get the counterfoil (Form A) stamped – attach details in the return.
- Do not mix CGAS funds with savings; use only for the house.
- Track the 2-year and 3-year deadlines in a calendar.
- If you are an NRI, check repatriation and FEMA aspects before depositing.
Common mistakes
- Depositing after the return due date but before a belated return – exemption denied.
- Using CGAS money for furniture, registration of another asset or personal expenses.
- Forgetting that unused balance is taxed at the end of the period.
- Not reporting CGAS interest annually.
Key takeaway
CGAS is the safety net for Section 54/54F claims when the new house is not yet bought by the return due date. Deposit before that date, withdraw only for the house, and track the deadline. Our capital gains planning service helps with the computation, deposit and closure.
Official references
Official sources to verify the current text, notifications and circulars:
Frequently asked questions
What is the last date to deposit in the Capital Gains Account Scheme?
The due date of filing the return under Section 139(1) (Section 263(1) of the 2025 Act) for the year of sale – generally 31 July for individuals without business income. A belated return date is not enough.
Which banks offer CGAS?
Designated branches of public sector banks such as SBI, Bank of Baroda, Punjab National Bank, Canara Bank and others notified under the scheme. Not every branch handles it.
What is the difference between Account A and Account B?
Account A is a savings-type account for funds you will withdraw soon for construction or purchase. Account B is a term deposit, cumulative or non-cumulative, for funds needed later.
What happens if I do not use the CGAS money within the time limit?
The unutilised amount becomes taxable as long-term capital gain in the year in which the 2-year or 3-year period expires. You can then withdraw it with the assessing officer's approval.
Can CGAS funds be used to pay stamp duty on the new house?
Yes, stamp duty and registration for the new house are part of its cost and can be paid from CGAS withdrawals.
Is CGAS available for Section 54EC?
No. Section 54EC requires investment in specified bonds within six months; CGAS does not extend that time.
Can I close the CGAS account early?
Only with the approval of the assessing officer, after which unutilised amounts become taxable.
This article is general information on the law as on 10 November 2026, written for educational purposes. It is not professional advice for your case. Section numbers under the Income-tax Act, 2025 should be confirmed with the official section mapping on the Income Tax Department website before use in filings.
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