Capital Gains Account Scheme (CGAS): Complete Guide - Deposit, Withdrawal & Tax Exemption FY 2026-27

The Capital Gains Account Scheme (CGAS), 1988, is a government-backed tax-saving facility that enables taxpayers to secure capital gains tax exemptions under Section 54, Section 54B, 54D, Section 54EC, Section 54F, 54G, 54GA, and 54GB even when they are unable to reinvest capital gains before the due date of filing Income Tax Return. Introduced to provide flexibility and prevent genuine taxpayers from losing exemption benefits due to timing constraints in finding suitable investment opportunities, CGAS allows taxpayers to deposit unutilized capital gains or net sale consideration in designated accounts with authorized public sector banks before the ITR filing deadline, thereby securing the exemption claim. The scheme offers two types of accounts - Type A (Savings Account with flexible withdrawals) and Type B (Term Deposit with structured maturity) - catering to different investment planning needs. With a ₹10 crore maximum deposit limit for Sections 54 and 54F, specific withdrawal procedures through Forms C and D, strict utilization timelines (2-3 years depending on section), and requirement to utilize withdrawn funds within 60 days, CGAS provides a structured mechanism for taxpayers to park capital gains temporarily while searching for qualifying investments in residential property, specified bonds, or other eligible assets. This comprehensive guide for FY 2026-27 covers all aspects of CGAS including eligibility, account types, deposit procedure, withdrawal rules, authorized banks, forms required, consequences of non-utilization, and practical compliance strategies.

What is Capital Gains Account Scheme (CGAS)?

The Capital Gains Account Scheme (CGAS) is a statutory scheme notified by the Central Government under Section 54 to Section 54GB of the Income Tax Act, 1961. It provides a mechanism for taxpayers earning capital gains to park their gains in specified bank accounts to secure tax exemption benefits.

Who Can Use CGAS?

Eligible Taxpayers

When to Use CGAS?

CGAS is required when:

1. You have earned capital gains from sale of capital asset
2. You want to claim exemption under Sections 54 to 54GB
3. You are unable to complete the required investment before the due date of filing Income Tax Return
4. You intend to make the investment within the prescribed period (2-3 years depending on section)

Types of CGAS Accounts

The Capital Gains Account Scheme offers two types of accounts to suit different investor needs:

Comparison - Type A vs Type B

How Much to Deposit in CGAS?

The amount to be deposited in CGAS depends on the specific exemption section being claimed:

Section-Wise Deposit Requirements

Authorized Banks for CGAS

CGAS accounts can be opened only with authorized public sector banks designated by the Central Government. As of FY 2026-27, major authorized banks include:

How to Open CGAS Account - Step-by-Step Procedure

Deposit Timeline - When to Deposit in CGAS?

Withdrawal from CGAS - Rules and Procedure

Withdrawal from CGAS is permitted ONLY for specified investment to claim exemption. Cannot be withdrawn for any other purpose.

Withdrawal Rules

Type A (Savings Account) Withdrawal

• No restrictions: Can withdraw any amount anytime
• Procedure:
  1. Visit bank branch
  2. Submit Form C (for first withdrawal) or Form D (for subsequent withdrawals)
  3. Specify amount to be withdrawn and purpose
  4. Receive amount via cheque/NEFT/cash (as per bank policy)
• Utilize within 60 days for specified investment
• Re-deposit unused amount immediately in Type A

Type B (Term Deposit) Withdrawal

• Premature withdrawal allowed but with extra steps
• Procedure:
  1. Request premature closure/partial withdrawal of Type B deposit
  2. Bank will transfer amount to Type A account (must be opened if not already existing)
  3. May attract premature withdrawal penalty as per FD rules (typically 0.5-1% reduction in interest)
  4. Then follow Type A withdrawal procedure using Form C/D
  5. Utilize within 60 days

Forms Used in CGAS

The CGAS scheme uses several forms for various stages:

Utilization Timeline - When to Use CGAS Funds?

The period within which CGAS funds must be utilized depends on the exemption section:

Interest on CGAS Deposits

Closing CGAS Account - Form F

CGAS account can be closed in following scenarios:

1. After Full Utilization:
   • When entire CGAS amount utilized for specified investment
   • Submit Form F with proof of utilization (sale deed, payment receipts, bond certificates)
   • Bank verifies utilization and closes account
2. After Prescribed Period Expiry:
   • If investment not made within prescribed period (2-3 years)
   • Withdraw balance and report as capital gains in ITR
   • Submit Form F to close account
3. Approval Required:
   • For closing account, approval from Income Tax Officer (AO) under whose jurisdiction you fall may be required
   • AO verifies proper utilization or proper taxation of unutilized amount
   • Bank may close only after AO approval (varies by bank policy)

Detailed Examples - CGAS Usage

Common Mistakes to Avoid with CGAS

Recent Developments - FY 2026-27

Frequently Asked Questions (FAQs)

Key Takeaways for FY 2026-27

• CGAS allows depositing capital gains to secure exemption before ITR due date even when investment incomplete
• Applicable for exemptions under Sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA, 54GB
• Two account types: Type A (savings, flexible) and Type B (term deposit, higher interest)
• Deposit deadline: Before ITR due date (31st July/31st October)
• Type A: 3-4% interest, anytime withdrawal; Type B: 5-7% interest, structured maturity
• Section 54F/54GB: Deposit net consideration (not just capital gains)
• Maximum deposit: ₹10 crores for Section 54/54F (from FY 2024-25)
• Authorized banks: PSU banks + select private banks (ICICI from Jan 2026) - urban/semi-urban branches only
• 60-day utilization rule: Withdrawn amount must be invested within 60 days
• Forms required: Form C (first withdrawal), Form D (subsequent withdrawals)
• Utilization timeline: 2 years for purchase, 3 years for construction, 6 months for bonds (section-specific)
• Non-utilization consequence: Exemption reversed, becomes taxable capital gains in year period expires
• Interest taxable: All CGAS interest taxable as "Other Income" (no 80TTA/80TTB exemption)
• No cheque book: All transactions through bank branch with forms
• Closure: Form F with Income Tax Officer approval after full utilization or period expiry
• Must file appropriate ITR form with CGAS details to claim exemption

Conclusion

The Capital Gains Account Scheme (CGAS), 1988, stands as a critical taxpayer-friendly mechanism in India's capital gains taxation framework, ingeniously bridging the temporal gap between earning capital gains and completing qualifying investments required for tax exemptions. By allowing taxpayers to secure exemption benefits immediately upon filing Income Tax Returns while providing extended timelines (2-3 years) to identify and execute suitable investments, CGAS removes the pressure of rushed investment decisions that could result from rigid compliance deadlines. This flexibility is particularly valuable in real estate transactions where finding appropriate residential property matching one's requirements can take considerable time, and in scenarios involving construction where project completion spans multiple years.

The dual account structure - Type A (Savings Account) and Type B (Term Deposit) - demonstrates thoughtful design catering to diverse taxpayer needs. Type A serves taxpayers who are actively searching for investment opportunities and may require funds on short notice, offering liquidity and convenience despite lower interest rates. Type B, conversely, rewards those with longer investment horizons who can lock funds for extended periods, providing higher interest rates comparable to fixed deposits while maintaining the core CGAS benefits. This optionality ensures that taxpayers aren't forced into suboptimal financial arrangements but can align their CGAS strategy with their specific investment timelines and liquidity preferences.

The introduction of CGAS services by private sector banks like ICICI Bank from January 2026 marks a significant expansion of accessibility beyond traditional public sector banks. This diversification of service providers enhances convenience, particularly for customers already banking with these institutions, and introduces competitive service quality improvements. The extension to Non-Resident Indians through NRCGAS accounts further broadens the scheme's reach, acknowledging that NRIs too face capital gains situations and require similar flexibility in completing cross-border property investments.

However, CGAS is not without its compliance complexities and pitfalls. The strict deposit deadline - before ITR due date - admits no exceptions, and missing it results in complete forfeiture of exemption benefits regardless of the magnitude of capital gains involved. The 60-day utilization rule after withdrawal, while reasonable, requires disciplined transaction management to avoid inadvertent violations that could trigger exemption reversals. The distinction between depositing "capital gains" for most sections versus "net sale consideration" for Section 54F is subtle but financially significant, and errors here lead to partial exemption loss. The requirement to maintain proper documentation of utilization and submit Forms C/D correctly for successive withdrawals creates administrative burden that must be managed meticulously.

The taxation of CGAS interest as "Income from Other Sources" without any exemption under Sections 80TTA or 80TTB may seem paradoxical - earning interest on funds parked specifically for tax-exempt purposes, yet paying tax on such interest. However, this treatment is consistent with the broader principle that only the specified investments (residential property, bonds, etc.) qualify for exemption, not ancillary income earned during the interim parking period. Taxpayers must factor this tax liability into their financial planning and ensure proper reporting in ITRs to avoid complications.

The ₹10 crore cap introduced from FY 2024-25 on exemptions under Sections 54 and 54F (and consequently on CGAS deposits for these sections) represents a policy shift toward capping tax benefits for ultra-high-net-worth individuals while retaining meaningful exemptions for the broader taxpayer base. While this ceiling may impact a small segment of taxpayers with very large capital gains, for the vast majority, the limit is sufficiently high to preserve full exemption benefits. The absence of such caps on Section 54B (agricultural land) reflects different policy priorities regarding agricultural economy support.

Looking forward, the CGAS framework would benefit from certain refinements: (1) Clearer guidelines on partial withdrawals and proportionate utilization tracking, (2) Digitization of Forms C/D with online submission and approval processes reducing bank visit requirements, (3) Integration with Income Tax portal for automated ITR verification of CGAS deposits and utilization, (4) Extended grace periods or relaxations for genuine hardship cases (medical emergencies, natural disasters) that prevent timely utilization, and (5) Harmonization of rules across all capital gains exemption sections to reduce confusion.

For taxpayers in FY 2026-27, successful CGAS utilization requires proactive tax planning. Upon deciding to sell capital assets, immediately evaluate whether exemption investment can be completed before ITR due date. If not, initiate CGAS account opening well in advance (not in the last week before deadline), choose appropriate account type based on investment timeline certainty, deposit the correct amount (especially vigilant with Section 54F net consideration requirement), claim exemption confidently in ITR, maintain disciplined search for qualifying investments, document all utilization meticulously, and monitor utilization deadlines vigilantly to avoid exemption reversal.

Professional advice from qualified Chartered Accountants becomes invaluable in complex scenarios involving multiple capital gains, partial utilizations, CGAS for different exemption sections simultaneously, or uncertainty about investment completion timelines. The cost of such professional guidance is trivial compared to the potential tax savings preserved through correct CGAS utilization or the tax liabilities incurred through incorrect handling.

In conclusion, the Capital Gains Account Scheme represents thoughtful tax administration that balances revenue protection with taxpayer convenience. By providing structured flexibility for completing qualifying investments while securing exemption benefits early, CGAS enables informed, unhurried investment decisions rather than forced, suboptimal transactions driven solely by tax deadline pressures. Understanding its mechanics, respecting its deadlines, utilizing its flexibility wisely, and maintaining meticulous documentation transforms CGAS from a mere compliance tool into a strategic tax planning instrument that preserves legitimate exemption benefits while maintaining full regulatory compliance. As capital gains taxation becomes increasingly significant with growing asset values and investment activities, mastering CGAS utilization becomes an essential skill for savvy taxpayers and their professional advisors.

Earned Capital Gains? Planning to Claim Exemption? Need CGAS Guidance? Consult qualified Chartered Accountants for proper CGAS deposit planning, account type selection, and timely investment execution. Explore our guides on Capital Gains Tax, Section 54, Section 54F, Section 50C, and TDS on Property for comprehensive tax planning.