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Quick Snapshot: Understand This in 2 Minutes
You sold your house. You made Rs. 90 lakh in capital gains. You want to claim exemption under Section 82 (buy a new house). But the ITR due date is 3 months away and you have not found the right property yet.
What do you do? You cannot just hold the cash and claim exemption later. The law requires you to either invest or deposit before filing.
The Capital Gain Account Scheme (CGAS) is that deposit. Open a CGAS account at a designated bank. Deposit the Rs. 90 lakh. File your ITR and claim the exemption. Now you have time to find and buy the house. The clock is still running on the original deadline, but your exemption claim is safe.
| Parameter | Details |
| Applies to sections | Sections 82, 83, 84, 86, 87, 88 (NOT Section 85) |
| Deposit deadline | Before filing the income tax return, and no later than the ITR due date under Section 263(1) |
| Where to deposit | Designated bank branches under the CGAS (nationalised banks) |
| Deemed cost | Amount deposited + amount already invested = treated as cost of new asset for exemption computation |
| If not utilised | Unused balance becomes taxable as capital gains in the Tax Year in which the reinvestment time limit expires |
CGAS Applies to These Sections, Not Section 85
| Section | Asset Sold | CGAS Available? |
| 82 | Residential house | Yes |
| 83 | Agricultural land | Yes |
| 84 | Compulsorily acquired industrial land/building | Yes |
| 85 | Land or building (invest in bonds) | No. Must invest within 6 months. |
| 86 | Any long-term asset except house | Yes |
| 87 | Urban industrial assets (shift to non-urban) | Yes |
| 88 | Urban industrial assets (shift to SEZ) | Yes |
How the CGAS Deposit Works: Step by Step
Step 1: Calculate the capital gain on the asset sold.
Step 2: Subtract any amount already invested in the new qualifying asset before the ITR due date.
Step 3: Deposit the balance (uninvested capital gain) in a CGAS account at a designated nationalised bank.
Step 4: File your ITR. Claim exemption for the sum of amount already invested plus the CGAS deposit. Attach proof of deposit.
Step 5: Use the CGAS funds to purchase or construct the new asset within the time limit specified in the relevant section.
Step 6: After each withdrawal from CGAS for reinvestment, submit a certificate of utilisation to the bank.
CGAS Example: Section 82
Arun sells his house in April 2026. Capital gain = Rs. 90 lakh. He has invested Rs. 20 lakh in a new property before the ITR date in July 2026. He deposits the remaining Rs. 70 lakh in CGAS. He claims exemption of Rs. 90 lakh (Rs. 20 lakh invested + Rs. 70 lakh in CGAS). He has until April 2028 to purchase the house using the CGAS funds. If he buys by then, the exemption stands. If not, Rs. 70 lakh becomes taxable capital gain in Tax Year 2028-29.
What Happens If CGAS Funds Are Not Used Within the Deadline?
This is the consequence every taxpayer must understand. If the CGAS deposit is not utilised within the reinvestment period specified in the applicable section, the unused balance is charged to capital gains tax in the Tax Year in which the time limit expires.
The tax rate applied is the same rate that applied to the original capital gain.
Lapse Example
Priya deposited Rs. 60 lakh in CGAS in 2025 under Section 82. She did not buy any property by April 2027 (2 years from sale). In Tax Year 2027-28, Rs. 60 lakh becomes taxable as LTCG. She must pay the applicable tax plus any interest.
Two Types of CGAS Accounts
| Type | Account A (Savings Type) | Account B (Term Deposit Type) |
| Nature | Like a savings bank account; withdraw as needed | Like a fixed deposit; withdraw in tranches |
| Flexibility | Higher flexibility; suitable for ongoing construction | Lower flexibility; suitable when large one-time purchase is planned |
| Interest | Lower, like savings rate | Higher, like FD rate |
Key Rules to Remember
- The deposit must be made before filing the ITR. Filing first and depositing later does not protect the exemption.
- Proof of CGAS deposit must be submitted with the ITR. Keep the deposit certificate safe.
- Each withdrawal from CGAS must be for the purpose specified in the relevant section. Withdrawals for unrelated purposes disqualify the exemption.
- CGAS accounts can only be opened at designated branches of nationalised banks. Not all bank branches qualify.
Practical Compliance Checklist
- Sold a capital asset and planning to claim exemption? Calculate how much you need to invest and how much you have already invested before the ITR date.
- Deposit the uninvested balance in CGAS before the ITR due date. Do not file the return first and deposit later.
- Attach the CGAS deposit certificate with your ITR as proof. Your Assessing Officer may ask for it.
- Track the reinvestment deadline carefully. Set a reminder 3 months before the expiry of the reinvestment period.
- Use CGAS funds only for the purpose they were deposited. Document every withdrawal with invoices and purchase receipts.
- If your reinvestment is under Section 85 (bonds), there is no CGAS option. Invest within 6 months directly. No shortcuts.
CGAS is not a loophole. It is a built-in safety valve in the capital gains exemption framework. It recognises that property transactions take time. You may sell quickly but find the right property months later. CGAS lets you bridge that gap without losing your exemption. The only rule is discipline: deposit on time, use the funds on time, and document everything.
