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A Guide to Capital Gains Account Scheme in India


07, March 2026

Have you sold your property or other assets and now face capital gains taxes? Don't worry. The Government of India offers an important scheme called the Capital Gains Accounts Scheme (CGAS), which helps you save tax.

Individuals or non-individuals who have made capital gain accounts can deposit their funds into capital gains accounts. There are various benefits, like tax exemption and delay in capital gains tax. The current CGAS scheme interest rate is 7.15% per annum. To withdraw money from a capital gain account, individuals should follow the steps stated by the government.

Want to know more about Capital gain account scheme(CGAS)

What is CGAS?

CGAS stands for Capital Gains Account Scheme. In 1988, the scheme was introduced by the Indian government to help taxpayers save on capital gains tax. When you sell property or securities, you make a capital gain. CGAS allows you to deposit this capital gain into a special account with a designated bank.

This defers your capital gains tax liability until you withdraw the funds or a specific time limit expires. The idea is to give you time to reinvest the capital gains in ways that qualify for tax exemptions under the Income Tax Act. CGAS is capital gains that help you manage your tax obligations.

What are the benefits of CGAS?

Those who have acquired capital gains from the sale of property may benefit from CGAS. The Capital gain account scheme allows them to save money on taxes.

Here are some of the Capital gain account scheme benefits:

  • Tax postponement: The main benefit of CGAS is the ability to delay your capital gains tax. By depositing capital gains into a CGAS account, you can postpone paying taxes until the funds are withdrawn or until a certain period of time. This allows you to plan your finances and reinvest money effectively.

  • Potential tax exemption: You may be eligible for a full or partial tax exemption, depending on how you reinvest the capital gains kept in your CGAS account. Sections 54 to 54GB of the Income Tax Act list several acceptable investment choices. Reinvesting in a new residential property, for example, may result in a complete exemption from capital gains taxes.

  • Investment flexibility: The capital gains reinvestment options available to you through CGAS are flexible. As per the Income Tax Act, you have the opportunity to invest in several options, such as bonds for rural electrification, newly constructed residential property, and infrastructure-specific bonds. You can then match your reinvestment plan to your financial objectives.

  • Interest-Free-Tax: Generally, you won't pay taxes on any interest you receive on capital gains deposited into your CGAS account. This provides an additional benefit for holding your funds within the scheme.

  • Simplified Tax Filing: You may be able to simplify your tax filing procedure by using CGAS. Your taxable income for that specific year may not reflect the capital gains because they are deferred or exempt.

CGAS Deposits: Type A and Type B Deposits

CGAS offers two deposit types, each meeting different demands and tastes of investors:

  • Type A: A savings deposit account mirroring a regular savings bank account with corresponding interest rates.

  • Type B: A term deposit account, akin to a fixed deposit account, boasting higher interest rates than savings accounts.

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Who can deposit in a Capital Gains Account Scheme?

The Capital Gains Account Scheme (CGAS) is a beneficial option for individuals who have earned capital gains from selling a property or asset. The scheme allows them to deposit the proceeds in a designated account to avail of tax benefits. The following table provides an overview of who can deposit in a CGAS:

  • Individuals: Any individual who has earned capital gains from selling a property or asset. They can be resident or non-resident.

  • Hindu Undivided Families(HUFs): HUFs can deposit capital gains in a CGAS account.

Important categories where deposits are accepted in CGAS

Section

Qualified Tax Payer Type

Source of Capital Gain

Section 54

Individual or HUF

Sale of residential property

Section 54B

Individual or HUF

Sale of farm land

Section 54D

All taxpayers

Compulsory acquisition of land and building

Section 54E

All taxpayers

Sale of long-term capital resource

Section 54EC

All taxpayers

Sale of land or structure (long duration)

Section 54F

Individual or HUF

Sale of non-residential long-duration capital resource

Section 54G

All taxpayers

Asset relocation during industrial transition

Section 54GA

All taxpayers

Asset relocation to Special Economic Zone

Section 54GB

All taxpayers

Relocation of residential real estate

Key documents for utilizing an account for capital gains

The following forms are needed in order to run a Capital Gains Account:

  • Form C: for withdrawing money out of a capital gains account. You have 60 days to use the money after withdrawal. A fresh Form C must be submitted for any further withdrawals.

  • Form D: Permits switching account types or transferring accounts within the same bank. There are penalties for early term deposit to savings conversions.

  • Form E is only available to individual Hindu United Families members (HUF). Use this form to designate an inheritor for the account's funds. Use Form F for nominee changes.

  • Form F: The income tax officer's consent is necessary to close the capital gains account. Use deposited funds within two years of property sale to avoid capital gains tax.

How to setup capital gain account?

  • Visit an authorized bank branch and ask for Form A.

  • Fill in the form providing all the details.

  • Submit it along with photocopies of the necessary documents.

How to withdraw money from Capital gain account

  • Application Form: You must fill out an application and send it to your bank to withdraw cash. If this is your first withdrawal, it may be referred to as Form C and Form D for the second-time withdrawal.

  • Documentation: Along with the application, you'll likely need to provide identification documents and your CGAS passbook.

  • Purpose of Withdrawal: In some cases, you might be required to specify the purpose of your withdrawal.

  • Time Limits and Reinvestment: Here's the crucial part: funds withdrawn from CGAS must be used for a qualifying investment within 60 days. These investments are outlined in the Income Tax Act (sections 54 to 54GB) and could include a new residential property or specific bonds.

  • Unused Funds: If you don't utilize the withdrawn amount within 60 days, it cannot be redeposited back into your CGAS account immediately. There might be options to deposit it into a different type of account, but you'll lose the tax benefits associated with CGAS.

By strategically using CGAS, you can effectively manage your capital gains tax burden and potentially achieve significant tax savings while reinvesting your gains towards your financial goals. Don't let capital gains taxes eat into your profits – leverage CGAS and make your money work smarter!

Consulting with a tax advisor is strongly advised. They can ensure you understand the eligibility requirements, make the most of CGAS in your particular circumstance, and successfully complete the withdrawal process.

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Most Frequently Asked Questions?

Can I add a nominee for a capital gain account?

Yes, you can add nominee for a capital gains account.

What are the benefits of using a Capital Gain Account?

Using a Capital Gain Account allows individuals to defer capital gains tax, providing them with more time to reinvest the funds into another property or asset. This can help in maximizing their investment and minimizing tax liabilities.

How does Capital Gain Account Scheme work?

When selling a property or asset, the funds are deposited into a Capital Gain Account within a specified time frame to defer capital gains tax. The funds can be withdrawn for specific purposes, such as purchasing another property.

What is Capital Gain Account?

Capital Gain Account is a type of bank account where individuals can deposit the proceeds from the sale of a property or asset to defer capital gains tax.

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