CGAS — park capital gains before the Sec 54 deadline
If you claim a Sec 54, 54F or 54B exemption but haven't reinvested by your ITR due date under Sec 139(1) (31 July for most individuals), deposit the unused amount in a Capital Gains Account Scheme (CGAS) account at a designated bank before that date. Otherwise that part of the exemption is lost, though the reinvestment window runs longer.
Why CGAS exists
Sections 54, 54B, 54D, 54F and 54G grant exemption from long-term capital gains if the gain (or net consideration, in case of Sec 54F) is reinvested in a specified new asset within a defined window — typically 2 years for purchase / 3 years for construction of a residential house. The problem: the ITR due date for the year of sale falls before the reinvestment window expires.
The Capital Gain Account Scheme, 1988 was notified to bridge that gap. Taxpayers who haven't completed reinvestment by the ITR due date are required to deposit the unutilised amount in a CGAS account by that date. The deposit is treated as "utilisation" for the exemption claim.
Two account types — A and B
- Account A (savings): earns savings-bank interest. Withdrawable on demand (with documented purpose). Best for shorter reinvestment timelines (~12-24 months).
- Account B (term deposit): FD-style with a lock-in. Higher interest. Choose maturity to match the reinvestment plan.
Interest earned in either account is fully taxable as Income from Other Sources in the year it accrues. It does NOT enjoy any Sec 54-series exemption.
Who runs it
Only specified scheduled banks — typically the big PSUs (SBI, Bank of Baroda, Canara, Indian Bank, PNB) plus a few private banks (HDFC, ICICI, Axis). Smaller banks and most cooperative banks are NOT authorised. Walk in with: PAN, Aadhaar, sale deed, capital gain computation, ITR acknowledgement (if filed), Form A (account opening), and proof of the unutilised amount.
Section-by-section timelines
| Section | Asset sold | New asset | Time window | CGAS deadline |
|---|---|---|---|---|
| Sec 54 | Long-term residential house | Purchase / construct residential house | 2 yrs (purchase) / 3 yrs (construction) | 31 July of next AY (ITR due date) |
| Sec 54F | Any LT capital asset (not house) | One residential house (full net consideration) | 2 yrs / 3 yrs | Same as Sec 54 |
| Sec 54B | Agri land (any term) | New agri land | 2 years | ITR due date |
| Sec 54D | Compulsory acquisition of industrial land/building | Industrial land/building | 3 years | ITR due date |
| Sec 54EC | LT land/building | NHAI / REC bonds | 6 months from transfer — no CGAS option | N/A |
| Sec 54G | Industrial asset shifted from urban to non-urban area | New plant/machinery | 3 years | ITR due date |
Sec 54EC bonds have a strict 6-month window. CGAS is not relevant there — either the bond is bought within 6 months or the exemption lapses.
What happens if you don't use CGAS money in time
If the CGAS balance isn't fully utilised within the original window (2 or 3 years from date of sale), the unutilised amount is treated as capital gain of the previous year in which the time expires. Example:
- Sale of property: October 2024. LTCG = ₹40L.
- Deposit in CGAS: ₹40L on 20 July 2025 (before ITR due date).
- By October 2026 (purchase window = 2 yrs from sale), only ₹25L spent on new house.
- Unutilised ₹15L becomes LTCG of FY 2026-27 (AY 2027-28), taxable at 12.5% under FA 2024 rates.
Closure — Form G
Once the reinvestment is complete or the window has expired, close the CGAS account by filing Form G with the bank, signed by the AO of your jurisdiction in some cases (the AO's endorsement requirement was diluted via CBDT circulars but check current practice). Closure releases the balance, which is taxable in the FY of closure if the window has expired.
Common mistakes
- Treating CGAS as optional. If reinvestment isn't complete by ITR due date, deposit is mandatory. Not depositing = lose the exemption entirely on the unutilised portion.
- Putting it in a normal FD instead of CGAS. A regular bank FD does not satisfy Sec 54-series deposit conditions. Must be a designated CGAS account.
- Net consideration vs net gain confusion. Sec 54 = deposit the gain; Sec 54F = deposit the net consideration. The Sec 54F amount is much larger because it includes the cost portion.
- Late deposit. Deposit must be on or before ITR due date. A few days late = the deposit doesn't backdate. Some High Court rulings have been kind on belated deposits with valid reasons, but don't bet on it.
- Forgetting interest disclosure. CGAS interest is taxable annually as IFOS — TDS at 10% under Sec 194A applies. Report it.
Step-by-step
- Compute LTCG / LTC and the section-specific reinvestment target amount.
- If reinvestment is incomplete by 15 July of the AY following the sale, walk into an authorised bank with Form A and supporting docs.
- Choose Account A or Account B based on planned reinvestment timeline.
- Deposit the unutilised amount before the ITR due date.
- Claim the exemption in ITR Schedule CG, mentioning the CGAS deposit + bank.
- Reinvest within 2 / 3 years. Use Form C for each withdrawal.
- Close via Form G after final utilisation or expiry.
- If any balance remains at expiry, offer the unutilised amount as LTCG in the year of expiry.
Bottom line
CGAS is a procedural bridge, not an exemption in itself. It buys time but doesn't alter the underlying Sec 54-series time limits. Treat it as a temporary parking lot, not a vault. Open the account before the ITR due date, document every withdrawal with purpose, and either finish the reinvestment within the original window or accept that the residue will be taxed at the appropriate LTCG rate in the year of expiry.