Capital Gains Account Scheme (CGAS): How to Park Your Flat Sale Money Without Losing the Exemption
Haven't bought your next home by the return filing date? Depositing the amount in a CGAS account keeps the exemption alive. Account types, forms and deadlines.
Selling a flat and buying the next one rarely lines up neatly. The house-reinvestment exemptions give you two years to buy or three to build, but your tax return is due much sooner. The Capital Gains Account Scheme, 1988 (CGAS) bridges that gap.
What the Act requires
Under section 86 of the Income-tax Act, 2025 (and the similar rule for selling a house and buying another), any amount not used to buy or build the new house before filing your return must be deposited in a scheme account before filing, and no later than the return due date. Proof of deposit is needed. The amount spent plus the amount deposited is treated as the cost of the new house.
Two account types
| Account A (savings) | Account B (term deposit) |
|---|---|
| Withdraw any time for the house purchase | Fixed term, like an FD |
| Savings interest | Term deposit interest |
| Good if you'll pay the builder or seller soon | Good if the purchase is further off; early withdrawal means moving to Account A first |
How it works in practice
- Open the account at an authorised bank branch (not rural branches) using Form A, with PAN and KYC. Separate accounts are needed for each exemption section.
- Withdraw using Form C the first time and Form D after that, stating how the money was used.
- Use withdrawals within 60 days for the purchase or construction.
- Close the account with approval from your Income Tax Officer, using Form G.
The deposit must be made before you file your return, and no later than the due date. Miss that and the exemption is gone.
If you don't use the money
Under section 86(4), if the deposit isn't fully used within the time allowed, the unused portion is charged to tax in the tax year in which three years from the original sale end. You can then withdraw the unused balance.
Other rules
- You can't take a loan against a CGAS account.
- Interest on the account is taxable.
- Keep the deposit proof safe. The tax department can ask for it.
Our experience
The most common mistake we see is a seller who plans to buy "soon" and files the return before depositing the money. Once the return is filed without the deposit, the exemption for the unspent amount is usually lost.
Related reading
Selling and buying in Mumbai? We help you time both. Book a video call.
Sources
- Income Tax Department: Section 86, Income-tax Act, 2025
- ClearTax: Capital Gains Accounts Scheme, 1988
General information, not tax advice. Speak to a chartered accountant before acting.
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