Capital Gains Account Scheme India: How to Open, Rules & Tax Savings (2026)

TL;DR

• Sold a property and sitting on capital gains? You can defer the tax by parking that money in a CGAS account.
• You get 2 to 3 years to reinvest in a new property. No reinvestment done? The gain becomes fully taxable.
• Open one at any authorised public sector bank before you file your ITR for that year.
• There are two account types: savings-style (Type A) and fixed deposit-style (Type B).

Let me be straight with you. I spent three weeks trying to figure out what the Capital Gain Account Scheme actually is, because every article I found was written like a government circular. “The scheme inaugurated in 1988 safeguards investors from hefty liabilities.” Great. Thanks. What do I actually do? This article is what I wish I had found.

What Is the Capital Gain Account Scheme (CGAS)?

Here is the plain version. You sold a property. You made a profit. The government calls that profit a long-term capital gain and wants to tax it at 20%. But there is a clause: if you are going to reinvest that profit into buying or building a new house, they will not tax it right away. The problem is, finding and buying a new property takes time. You cannot always do it before the tax return deadline.

CGAS is the government’s solution to that problem. You park your capital gains into a special bank account, claim the exemption in your ITR, and then use the money from that account when you actually reinvest. The money sits there, earns interest, and you are not rushing to buy a bad property just to dodge a tax bill.

The scheme has been around since 1988. It was set up specifically because the government recognised that property purchases take time, and penalising people for that timing gap was unfair.

Who Can Open a CGAS Account?

The eligibility is actually more straightforward than most people think. You need to be an individual or a Hindu Undivided Family (HUF) that has earned long-term capital gains from the sale of a property or other capital asset. Both Indian residents and NRIs can open these accounts, though NRIs work through a variant called the Non-Resident Capital Gain Account Scheme (NRCGAS).

You need to have actual proof of the gains and the sale. No sale, no eligibility. The exemption is claimed under Section 54 (for residential property sold and reinvested in residential property) or Section 54F (for any other long-term capital asset).

CGAS vs Other Options: The Comparison Nobody Draws Clearly

People always ask whether CGAS is worth it compared to just paying the tax and investing the rest, or going into bonds. Here is the actual breakdown.

The bonds option sounds great until you realise the Rs 50 lakh cap. If you sold a flat in Bangalore or Mumbai for a decent profit, you probably exceeded that limit. That is where CGAS becomes the only real alternative that keeps your money exempt and accessible for reinvestment.

Type A vs Type B: Which Account Do You Actually Want?

This is where people get confused. CGAS is not one account type. You choose between two, and you can even split your amount across both.

Type A — Savings Deposit Account Works like a regular savings bank account. You can withdraw as and when needed, with bank approval. Lower interest rate, roughly 3.5% to 4% per annum. Good if you expect to need the money in parts over time or are unsure of your reinvestment timeline.

Type B — Term Deposit Account Works like a fixed deposit. Higher interest rate, can go up to 6% to 7% depending on the tenure and the bank. The money is locked for the chosen term, but you can break it early if needed, again with bank approval.

Most people doing a big property reinvestment go with Type B for the bulk of the amount, since they know roughly when they will need the funds. If you are less certain of timing, split it across both.

How to Open a CGAS Account: Step-by-Step

There is no grand mystery to this. It is a branch-level process at most authorised public sector banks.

1. Calculate your long-term capital gain. Sale price minus the indexed cost of acquisition gives you your LTCG amount. This is what you will deposit.
2. Pick an authorised bank. SBI, Bank of Baroda, Punjab National Bank, Canara Bank, and most major PSU banks are authorised. Private banks like HDFC and ICICI are generally not on the CGAS authorised list. Confirm before you walk in.
3. Fill Form A at the branch. This is the account opening form specific to CGAS. The bank will give it to you. Fill in your PAN, personal details, and the deposit amount.
4. Choose Type A or Type B, or both. Decide based on your reinvestment timeline and how soon you will need the funds.
5. Submit your documents and deposit the funds. Bring PAN, Aadhaar, the property sale deed, and a statement showing your capital gains calculation. Make the deposit.
6. Get your CGAS account number and passbook. This account number is critical. You will mention it in Schedule CG of your income tax return when claiming the exemption.
7. Use the funds within the deadline. Buy the new property within 2 years or complete construction within 3 years from the date of the original sale. Use Form C or Form D to withdraw from the account for these purposes.

Deadline warning: The deposit must happen before the due date of filing your ITR for that financial year, or within 180 days from the date of sale, whichever comes earlier. Miss this window and you cannot use CGAS to defer the tax.

Documents Checklist Before You Visit the Bank

Show up with these and you will not be sent back.

• PAN Card (mandatory)
• Aadhaar Card for KYC
• Registered sale deed of the property sold
• Capital gains computation statement (typically prepared by your CA)
• Existing savings bank account details for linkage
• Two passport-size photographs
• Form A (available at the bank branch)
• If NRI: passport, overseas address proof, and NRE or NRO account details

Rules Around Withdrawals: Do Not Wing This

This is the part people read too casually and regret later. You cannot just walk in and withdraw from a CGAS account the way you would from a normal savings account. Every withdrawal requires prior approval from the Income Tax department via the bank.

For withdrawals up to Rs 25,000, the bank can approve directly. For anything above that, you need to submit Form C (for property purchase) or Form D (for construction) and get it signed off. The money must then be used for the stated purpose within 60 days of withdrawal. If you withdraw and do not use it for the reinvestment, it gets treated as taxable income.

CGAS 1988 also specifies that withdrawals cannot exceed 60% of the total balance in one go under certain conditions, and a minimum balance of Rs 50,000 must be maintained in the account at all times during the reinvestment period.

People sometimes treat the CGAS account like a parking spot for money they are going to use “eventually.” That is not how this works. The government is watching that clock. Two years for purchase. Three years for construction. After that, the unused amount becomes taxable, period.

What Happens If You Do Not Use the CGAS Funds in Time?

The unutilised amount in the CGAS account after the deadline is treated as long-term capital gains in the year the deadline expires. You will owe 20% tax on that amount, plus applicable surcharge and cess. The exemption that you originally claimed is essentially reversed for the unused portion.

This is why it is important to be sure about your reinvestment plan before opening the account. CGAS is not a scheme to indefinitely park gains. It is a bridge between a sale and a confirmed reinvestment.

Tax Reliefs and What You Actually Save

Here is the practical math. Say you sold a property and made a long-term capital gain of Rs 80 lakh. At the standard 20% LTCG tax rate, you would owe Rs 16 lakh in tax that year.

By depositing that Rs 80 lakh into a CGAS account and claiming exemption under Section 54, you pay zero tax immediately. You then use those funds to buy a new residential property. If you use the full amount, the entire Rs 80 lakh is exempt. If you only reinvest Rs 60 lakh, the remaining Rs 20 lakh gets taxed proportionally.

While the money sits in the account, it also earns interest, which is a bonus. The interest earned is taxable as regular income, but that is a small tradeoff for deferring Rs 16 lakh in capital gains tax.

CGAS and NRO Accounts: Not the Same Thing

NRIs sometimes mix these up. An NRO account is a regular bank account for managing rupee income earned in India, such as rent, dividends, or salary. It has no special tax exemption tied to capital gains. The NRCGAS is the capital gains account specifically designed for NRIs who have earned long-term capital gains and want to defer tax on reinvestment.

If you are an NRI who sold Indian property, you want the NRCGAS, not an NRO account, for this specific purpose.

Frequently Asked Questions