Property transactions are among the most significant financial decisions individuals make, and they should never be rushed. Along with the emotional and financial aspects, such transactions carry a substantial tax impact. Ignorance of capital gains tax provisions can prove costly and may result in losing a large portion of hard-earned money to taxes.
To address this practical challenge, tax law provides a mechanism that allows a taxpayer to save capital gains tax without making a hurried reinvestment decision. This mechanism is the Capital Gains Account Scheme (CGAS).
Let us understand this with a real-life example.
The Example
Raj, a resident of Mumbai, sells his old flat in March 2026 for ₹2 crore (net of selling expenses). The flat was purchased many years ago for ₹30 lakh, resulting in a long-term capital gain of ₹1.70 crore.
To claim exemption under the law, Raj would normally need to purchase another residential house worth ₹1.70 crore on or before 31 July 2026, being the due date for filing his income-tax return. Instead of rushing into a purchase, Raj can deposit the unutilised capital gain into a CGAS account on or before this date.
By doing so, the law grants him:
Up to 2 years to purchase a new residential house, or
Up to 3 years to complete construction of a new residential house
CGAS effectively allows Raj to defer tax while gaining time. This benefit is available not only under Section 54 (sale of a residential house) but also under Section 54F, where gains arise from sale of other long-term assets such as land, shares, or jewellery, provided the taxpayer does not own more than one residential house.
Opening a CGAS Account and Choosing the Right Type
Raj must open the CGAS account on or before 31 July 2026. The account can be opened with designated public sector banks, IDBI Bank, and—after recent notifications—19 approved private sector banks such as HDFC and ICICI.
Two types of accounts are available:
Type A – Savings Account: Lower interest but high flexibility for phased payments
Type B – Fixed Deposit: Higher interest, suitable for lump-sum payments
How to Withdraw Money from a CGAS Account
Withdrawals are strictly regulated and allowed only for the purpose of purchase or construction of the new house:
First withdrawal:
Submit Form C to the bank
Subsequent withdrawals:
Submit Form D along with a utilisation statement
Usage rule:
Amount withdrawn must be utilised within 60 days
Supporting documents required:
Agreement for purchase, construction invoices, sale deed, and bank statements
Unutilised balance after 2 or 3 years:
Treated as taxable capital gains in the year the period expires
Closing the CGAS Account
Once the amount is fully utilised—or if a balance remains taxable—the account can be closed. Raj must obtain prior approval from the Assessing Officer by applying in Form G. Currently, this is an offline process, but it is expected to move online from 1 April 2027.
CA Vivek Doshi
FCA – Practising Chartered Accountant
Knowtaxx Consultancy Private Limited
