Capital gains are a critical feature of income taxation, and individuals repeatedly seek ways to lower taxes owed when selling property. In India, individuals can use the Capital Gains Account Scheme (CGAS). It provides a way to delay paying taxes on capital gains. This helps people manage their tax responsibilities effectively. This blog takes a deep look at CGAS, explaining the tax effects it brings and the related accounts. Understanding CGAS and its details helps people make sound judgments, plan taxes better, and save more money. Take a closer look and learn about CGAS.
Overview of the Capital Gains Account Scheme
The Capital Gains Account Scheme in India is part of the Income Tax Act. It helps people put off paying tax on capital gains. This plan lets taxpayers keep the money they make from selling certain things, like property or stocks. They can then use that money later for approved investments. This is done under Sections 54 and 54F of the Income Tax Act. Putting off tax payments until the money is spent on specific things lets people manage their taxes. It also encourages legal investments.
Eligibility Criteria for Starting a CGAS Account
To be eligible to open a CGAS account, a person must have earned long-term capital gains from the sale of assets like stocks, property, or mutual funds. The scheme is present for both residents and non-residents of India. Nonetheless, non-residents can open a Non-Resident Capital Gain Account (NRCGAS) in place of a CGAS account. To open a CGAS account, a person must present evidence of the capital gains earned and the sale of the asset.
Features of the Capital Gains Account Scheme (CGAS)
The main features of CGAS are:
- Any sum of interest that a person earns from this scheme is due for taxation
- The deposit accounts can be relocated, but shifting banks is inadmissible
- Nomination of up to 3 persons is allowed, which may comprise a minor
- Only persons and HUFs are allowed to open a CGAS account
- The minimum deposit for a capital gain account is Rs. 1000, and there’s no maximum limit
- Any withdrawal sum under this scheme has to be used for buying or building an asset within a duration of 60 days from the withdrawal date
- The sum is deposited by the taxpayer in this non-collateralised account and will not function as a loan assistance
- It allows alterations in the nomination and also allows the appointment of a nominee
- Nominations for initiated accounts for minor, BOI, AOP, and HUF of the firm are not permitted
- If the withdrawal amount exceeds Rs. 25,000, the bank will make payment by means of a crossed demand draft to the person receiving it.
Different Kinds of Capital Gains Account Schemes
Two categories of checking accounts prevail under the Capital Gains Account Scheme:
1. Type A – Saving Deposit
It is akin to a regular savings bank account, with interest rates similar to those of a bank. Nonetheless, the interest is credited periodically, with the deposit holder receiving a passbook to list these transactions. Moreover, this type of checking account is highly liquid, like a savings account, allowing withdrawal at any time.
2. Type B – Term Deposit
This account is similar to a regular fixed deposit account and provides an interest rate for a term deposit. It also has restrictions similar to those of a term deposit account. Moreover, it furnishes a maximum term of 3 years, allowing the depositor to choose a tenure of deposit according to their plan.
The depositor acquires a deposit certificate, which shall be presented during withdrawal. This works like a regular fixed deposit, with auto-renewal. The interest you earn can be either cumulative or non-cumulative.
Who can put money into the Capital Gains Account Scheme?
Basically, any taxpayer who makes long-term capital gains and wants to get an exemption under Sections 54 to 54GB can deposit into this scheme. This covers things like: Hindu Undivided Families (HUFs), Individuals, Trusts, Companies, and any other individual eligible for capital gains exemption. The scheme is primarily used when the taxpayer is unable to reinvest the capital gains before the due date for filing an income tax return. Still, it proposes to finance within the fixed period to claim the exclusion.
The category of the taxpayer with capital gains who is eligible to invest in CGAS from Section 54 to 54F of the Income Tax Act, 1961, is furnished below:
| Section Number | Capital Gains made on | Category of person |
| 54 | Sale of residential | Individual or HUF |
| 54B | Sale of land used for agricultural purposes | Individual or HUF |
| 54D | Mandatory acquisition of land and buildings | Any taxpayer |
| 54E | The sale of any longstanding capital asset | Any taxpayer |
| 54EC | Sale of a long-term capital asset, being a building, land or both | Any taxpayer |
| 54F | Sale of any longstanding capital asset, not including residential property | HUF or Individual |
| 54G | Transfer of asset (plant, machinery or building, land or right in land or building) in case of shifting an industrial undertaking from an urban region | Any taxpayer |
| 54GA | Transfer of asset/s (plant, machinery or building, land or right in land or building) in case of shifting of an industrial undertaking from an urban region to a Special Economic Zone | Any taxpayer |
| 54GB | Transfer of residential property | Any taxpayer |
When Can One Deposit in the Capital Gains Account Scheme?
The taxpayer should invest the sum in the CGAS within the following dates:
- The due date of filing the return on income (For HUF and individuals – the due date is 31st July of the following financial year).
- The date of filing of the return of the assessee.
Let’s get a handle on this time limit with an example.
- Mr C has qualified for an exemption under section 54F for the Financial Year 2024-25. He’s looking to buy a property for Rs. 6 crores. He actually filed his income tax return on June 16th, 2025. Now, to get that exemption, he needed to have put the money into CGAS by June 16th.
- If he missed the due date of 31st July 2025 and filed the delayed returns on 5th August, he should have deposited the money to CGAS on or before 31st July 2025.
Bottom Line
The Capital Gains Account Scheme (CGAS) is a really useful way to manage capital gains. It lets people put off paying tax on their gains, and maybe even pay less, while they figure out their next investments. Using CGAS helps with managing your money. It also helps you keep up with tax rules. This can help you avoid legal trouble that might come from not handling things right.
By managing Account-A and Account-B timing when to terminate accounts, and learning the rules about withdrawals, legal transfers, and nominations, taxpayers can achieve better financial results while following the regulations.
This comprehensive guide aims to ease the complex landscape of capital gains tax management, furnishing a roadmap for successful, efficient tax planning through CGAS.
