Capital Gains Account Scheme (CGAS): How to Open It, Which Forms to Use, and How to Close It Without Losing Your Exemption

Almost every guide to Section 54 and 54F mentions the Capital Gains Account Scheme in a single sentence: if you have not bought the new house by the filing due date, park the money in a CGAS account. True, and useless when you are standing at a bank counter in July being handed a form set nobody has explained.

CGAS is not an investment product. It is a compliance locker, governed by the Capital Gains Accounts Scheme, 1988, with its own forms, its own withdrawal rules, and a closure procedure that needs your Assessing Officer's signature. Taxpayers lose exemptions on this scheme far more often through paperwork than through bad intent - a deposit made two days late, a withdrawal left unspent, or an account quietly closed by the bank without approval.

This guide covers the mechanics end to end. For the eligibility conditions themselves, read the complete guide to Sections 54, 54F and 54EC first.

When You Actually Need a CGAS Account

You need one only if both are true:

1. You are claiming a reinvestment exemption under Section 54, 54B, 54D, 54F, 54G, 54GA or 54GB.
2. The reinvestment is incomplete as on the due date for filing your return under Section 139(1).

If you sold a flat in September 2025 and bought the replacement in March 2026, there is nothing to deposit. The gain was already utilised before the due date. CGAS exists purely to bridge the gap between the filing deadline and the two or three year reinvestment window.

The Deadline That Matters

For FY 2025-26 sales (AY 2026-27), the deposit had to be made on or before 31 July 2026 for non-audit individuals - the Section 139(1) due date, not the 31 December 2026 belated deadline. For a property or asset you sell during FY 2026-27, the corresponding deposit deadline is 31 July 2027.

This distinction trips people up because they assume filing late extends the deposit date. It does not, as a matter of plain statutory reading. A number of High Courts have taken a taxpayer-friendly view that actual investment made before the extended Section 139(4) date also preserves the exemption, but that is a litigation position, not a planning strategy. Treat 31 July as hard.

What If You Missed It

If you sold in FY 2025-26 and did not deposit by 31 July 2026, do not simply open an account now and backdate the claim in a belated return. The deposit date is printed on the Form A acknowledgement and feeds into Schedule CG. Your realistic options are to complete the actual purchase or construction within the statutory window and claim on that basis, or - where the asset was long-term land or building sold on or before 31 January 2026 - check whether the six-month Section 54EC bond route is still technically open to you. Claiming a deposit you did not make on time is a misreporting exposure under Section 270A, not a shortcut.

Which Banks Offer CGAS

Only branches of banks notified for the scheme, and rural branches are excluded even at an eligible bank.

In practice this means public sector banks: State Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank, Union Bank of India, Indian Bank, Central Bank of India, Bank of India, and IDBI Bank. Most private banks - HDFC, ICICI, Axis, Kotak - do not offer CGAS at all. Do not waste a week trying to open one at the bank where you already hold your salary account.

Call the branch before you go. CGAS volumes are low enough that many branch staff have never processed one, and you want the officer who has.

Account A vs Account B: Pick Correctly

Choose Account A if you are buying a ready property, or funding construction in instalments where you will draw repeatedly. The flexibility is worth the lower interest.

Choose Account B if you have identified nothing yet and know the money will sit for two years. On Rs 50 lakh, the gap between a 2.7 percent savings rate and a 6.8 percent term rate is roughly Rs 2 lakh a year - real money for doing nothing except filling one extra form.

You can hold both. A common structure for a construction case is to keep the next twelve months of planned payments in Account A and the balance in Account B, converting tranches across as the build progresses.

The Form Set: A Through H

This is the part no one explains at the counter.

Carry to the branch: Form A in duplicate, PAN, proof of the sale (registered sale deed or broker statement), and the computation showing the gain amount. Deposit by cheque or demand draft is treated as made on the date you tender it, subject to realisation - which is exactly why you do not tender it on 31 July.

There is no minimum or maximum deposit. But note that Section 54 and 54F exemptions are capped at Rs 10 crore from AY 2024-25 onward, so depositing above that ceiling buys you nothing but taxable interest.

Withdrawal Rules, and the 60-Day Trap

Withdrawals from Account A are made on Form C and must be used only for the purchase or construction you declared.

The rule that catches people: any amount withdrawn and not utilised for its stated purpose must be re-deposited into Account A immediately, and in practice within 60 days of withdrawal. Money you pulled out for a booking that fell through cannot sit in your savings account "for now." It goes back.

From the second withdrawal onward, the bank will not release funds on Form C alone. You must attach Form D showing how the previous withdrawal was spent. Keep builder receipts, stamp duty challans and registration costs filed as you go, because reconstructing them eighteen months later in front of a branch officer is miserable.

To withdraw from Account B before maturity, file Form B to convert the deposit to Account A, then Form C. The bank applies its ordinary premature-withdrawal penalty - typically one percentage point off the applicable rate.

The Interest Is Taxable, Every Year

This is the single most commonly missed consequence.

The capital gain parked in CGAS is exempt. The interest it earns is not. It is taxable as Income from Other Sources in the year it accrues, at your slab rate, and the bank deducts TDS under Section 194A once interest crosses the threshold.

So if you deposited Rs 60 lakh in Account B at 6.8 percent in July 2026, roughly Rs 4.08 lakh of interest accrues over FY 2026-27 and belongs in your AY 2027-28 return - even though you cannot touch the principal. It will appear in your AIS, so an omission surfaces as a mismatch. See Form 26AS vs AIS vs TIS explained for how to reconcile it.

Account A interest is eligible for the Section 80TTA or 80TTB savings-interest deduction under the old regime, since it is a savings deposit. Account B interest is not.

Reporting CGAS in Your ITR

Schedule CG of ITR-2 has a dedicated row for amounts deposited in the Capital Gains Accounts Scheme before the due date, and it asks for three things:

• Date of deposit
• CGAS account number
• IFSC code of the branch

Enter them exactly as printed on your passbook or deposit certificate. A wrong IFSC is a standard trigger for a Section 143(1) adjustment denying the exemption, and unwinding that takes months. When you file through 49Tax, the deposit details are carried into Schedule CG alongside the sale computation and checked against the due date for the relevant assessment year, so a late deposit is flagged before the return goes out rather than after.

What Happens If You Do Not Use the Money

The utilisation window runs from the date of transfer of the original asset, not from the date of deposit:

• Purchase of a residential house: 2 years
• Construction of a residential house: 3 years
• Agricultural land under Section 54B: 2 years

Whatever remains unutilised when the window expires is taxed as capital gains of the previous year in which the period ends. The character is preserved - a long-term gain stays long-term, taxed at 12.5 percent without indexation for most assets.

Under Section 54F, the clawback is proportionate: if you used 70 percent of the net consideration, you keep 70 percent of the exemption and the remaining 30 percent is charged. Under Section 54 it is the unutilised gain itself that is charged.

You can then withdraw freely, but the closure procedure still applies.

Closing the Account: Form G and the AO

You cannot walk in and close a CGAS account. Form G requires the prior approval of your Assessing Officer, who certifies that the gain has either been properly utilised or has been offered to tax.

The sequence:

1. Complete the purchase or construction, or let the window lapse and report the gain in the relevant year's return.
2. Apply to your jurisdictional AO - usually through the e-Nivaran or e-proceedings tab on the income tax portal - with the sale deed of the old asset, the purchase deed or completion proof of the new one, your ITR acknowledgements, and the CGAS statement.
3. Carry the AO's approval, with Form G, to the branch.

Start this four to six weeks before you need the money. Branches genuinely will not release the balance without the approval letter, and it is the one step in the whole process you do not control.

If the Depositor Dies

The balance does not become taxable capital gains in the hands of the nominee or legal heirs. It is treated as part of the estate and passes to them, closed out on Form H with AO approval. This is why Form E matters at opening: without a nomination, the heirs need a succession certificate before the AO will look at the file at all.

The Takeaway

Treat CGAS as a dated compliance chain, not a bank account. Three dates decide whether your exemption survives: the deposit by 31 July of the relevant assessment year, the utilisation window measured from the sale date, and the AO approval before closure.

If you sell a long-term asset this financial year and have no replacement identified, do two things in the same week: call a public sector branch to confirm it processes CGAS, and open the account with Form A and Form E together while the sale documents are still on your desk. Then set a calendar reminder for twenty-two months out. The scheme asks very little of you, but it asks it on specific days.