Capital gains arise when the consideration received on transfer or sale of a property is more than its indexed cost. The amount of capital gains that is not appropriated by an assessee towards the purchase of another property before one year from the date of transfer or within two year from the date of transfer of the original property or constructed within 3 years from the date of transfer, or that is not utilised by him for the purchase or construction of a new property before the date of furnishing the return of income, should be deposited by him in a specified nationalised bank. The amount should be invested in a ‘Capital Gains Account Scheme‘ under the Capital Gains Account Scheme, 1988. The scheme is applicable to all assessees having capital gains. The deposits may be made in one lump sum or in installments at any time. The amount should be deposited before the due date for filing income tax returns. Section 54/54F & time limit for deposit/ reinvestment of capital gain

1. Who are eligible to take the advantage of Capital Gains Account Scheme?

Mainly, the advantage of Capital Gains Account Scheme can be derived by individuals and Hindu Undivided Family. To be more precise, all those tax payers who would like to invest in buying a residential property or in constructing a residential property so as to save tax in respect of long-term capital gain can find much advantage in this scheme known as Capital Gains Accounts Scheme 1988.

Before analysing the salient features of this scheme, it may be recalled here that to save tax on capital gain, various provisions are contained in the Income Tax Act, 1961 whereby if investment is made one year from the date of transfer or within two years from the date of sale/or constructed within 3 years from the date of sale one can save capital gain tax in respect of long-term gain, especially if the investment is made in acquiring another residential property.

Similarly, if the tax payers were to construct a residential property then the time period for completing the construction is within three years from the date of sale. Now, in between comes the role of Capital Gains Accounts Scheme.

All those tax payers who are taking advantage of the above mentioned schemes of making investment in residential property are advised to take advantage of the Capital Gains Accounts Scheme, especially if they are not able to make investment in residential property by the last date of filing the income tax return.

For example, if a person derives long-term capital gain on April 10, 2010, in that event he must make the investment in acquiring new residential property within two years from the date of sale or when the said property is proposed to be constructed then within three years from the date of sale.

However, there is also a condition that if the tax payer is not able to buy or construct the said property by the last date of filing the income tax return, in that event the amount has to be deposited in the Capital Gains Accounts Scheme. For example , as mentioned above, if the property is sold on April 10, 2017, the tax payers can buy or construct the property by July 31, 2018 (extended to 31st August 2018 for A.y 2018-19), which happens to be the last date of filing the income tax return.

In a situation where such purchase or construction is not completed by 31st August 2018 in that event the money must be deposited on or before 31st August 2018, that is, the last date of filing the income tax return in terms of the Capital Gains Accounts Scheme.

2. List of Banks  who can Accept Deposit under Capital Gains Account Scheme

The account under Capital Gains Accounts Scheme cannot be opened in all the branches and with all the banks. The government has identified the following 28 banks to accept the deposit under Capital Gains Accounts Scheme 1988.  These banks are: State Bank of India, Central Bank of India, Bank of India, Punjab National Bank, Bank of Baroda, UCO Bank, Canara Bank, United Bank of India, Dena Bank, Syndicate Bank, Union Bank of India, Allahabad Bank, Indian Bank, Bank of Maharashtra , Indian Overseas Bank, Andhra Bank, Corporation Bank, New Bank of India, Oriental Bank of Commerce, Punjab & Sind Bank & Vijaya Bank. All branches of these banks except the rural branches are authorized to receive the deposit and maintain account under Capital Gains Accounts Scheme, 1988. Other than the above, no other bank is authorized to accept the deposit under Capital Gains Accounts Scheme.

3. Account Type Under Capital Gains Accounts Scheme

Under the scheme there can be two types of accounts-

i. Deposit Account A:

This account is like a savings deposit account. Withdrawals may be made from the account from time to time, subject to other conditions of the scheme. This account is suitable for assessees who are planning to construct a house over a period of time.

ii. Deposit Account B:

This account is like a term deposit that is payable after a fixed period of time. The interest earned on the deposit may either be withdrawn periodically or it may be reinvested.

In order to open the account, an assessee must fill up the prescribed application form in duplicate. Further, the type of account – A or B – is to be specified. In case Deposit Account B is opted for, it has to be specified whether the account will be cumulative or non-cumulative. The proof of such deposit should be attached with the income tax returns.

Both the accounts will be eligible to interest as per the guidelines of the Reserve Bank of India. Moreover, a depositor may make or change nominations to the account by filling in the relevant forms.

The amount can be utilised in accordance with the scheme which the Central Government may frame. The amount withdrawn should be utilised for the purpose of purchase or construction of a house.The amount withdrawn should be utilised for the purpose within sixty days of the withdrawal. Any unutilised amount should be redeposited in Deposit Account A.

The amount already utilised by an assessee for the purpose of purchase or construction of a new property together with the amount deposited will be deemed to be the cost of the new property. In case the amount deposited is not utilised wholly or partly for the purchase or construction of the new property within the period specified, then the unutilised amount will be charged as income(as LTCG) of the previous year in which the period of three years from the date of the transfer of the original property expires.

4. How to withdraw from Capital Gains Accounts Scheme

Further, an assessee will be entitled to withdraw the amount in accordance with the provisions of the scheme.

The withdrawals from Deposit Account A can be made through a prescribed form. In case of Deposit Account B, a depositor will first have to transfer the amount to Deposit Account A, and then make the withdrawal. The amounts can be transferred from one branch of a bank to another branch of the same bank only. A depositor may close the account with the approval of the assessing officer.

Forms C and D – Similarly, it is possible to convert the deposit Account B to the deposit Account A. As and when the money is required to be withdrawn for the purposes of making payment for the residential property, the assessee shall apply in form No C.  After receiving the application the bank shall permit the withdrawal of the amount. It may also be noted here that where the amount of withdrawal exceeds Rs 25,000, the bank will make the payment by way of crossed demand draft drawn in favour of the person to whom the depositor intends to make the payment.  Tax payers should also note that other than the initial withdrawal later on when the withdrawals are made by the tax payers, they shall furnish in Form No D in duplicate, the details regarding the manner and the extent of utilizing of the amount in respect of the immediately preceding withdrawal. The bank after receiving two copies of Form D from the accountholder will retain one copy and return the other copy to the tax payer.

Forms E and G- The scheme further provides that the amount which has been withdrawn should be utilized for purchase or construction of the property within 60 days from the date of such withdrawal. The facility of nomination is also available to the deposit holder by filling up Form No E.  Finally, when the property has been purchased or the construction has been completed and now the tax payer desires to close his Capital Gains Account Scheme then he shall make an application with the approval of the assessing officer. The application for closure of the account will be in Form G. Whenever you are contemplating to make a deposit in respect of Capital Gains Account Scheme, either by way of a savings account or a fixed deposit account , then please remember that you do not open the normal savings bank account or a normal saving bank deposit but specifically fill up No A and then make the deposit with the concerned bank under the Capital Gains Accounts Scheme.

5. Opening a bank account for Capital Gains Account Scheme

Once the deposit is made by you either in the savings account or in the fixed deposit account, please ensure that it is clearly mentioned in the account opened that it is for Capital Gains Account Scheme. A large number of tax payers commit the mistake of just opening a bank account with a bank to save capital gains and later on use the money for buying or constructing the residential property.  But please do remember that the income tax law very specifically provides that the money which has not been used for buying or constructing a residential property, such money should be kept exclusively under Capital Gains Accounts Scheme under a separate bank account in terms of Capital Gains Accounts Scheme.  Also do remember that the deposits in these accounts can be made in one lump sum or in instalment.

6. Things to Keep in Mind while opening Capital Gains Account Scheme

  • CGAS does not allow any withdrawals, except for the specified purpose (of buying the house), even of interest. More, the investor is required to pay tax on this interest (to which he has no access) on an accrual basis out of his other income.
  • Even if the sale is effected in, say, the first month of the financial year (say, April 2017), the taxpayer may deposit the amount in CGAS on the last date for filing returns. In other words, he can freely utilise this money for 15 months (April 2017to July 201 For A.y 2018-19 it can be used till 31.08.2018 as the return filing date has been extended) as he likes.
  • We have already discussed the fact that if the amount is not utilised wholly or partly for the desired purpose, within the specified period, the unutilised amount shall be treated as capital gains of the year during which the specified period expires.

(Republished with Amendments)

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More Under Income Tax


  1. Y.D.Swamy says:


    Y. D. Swamy,
    PAN No.ARRPS 6488A,
    E Mail ID: ydsh78@
    Phone No.9449407031.


    The CPC, Bengaluru..


    Sub: Seeking seeking clarification for closing the account under the
    Capital Gains Account Scheme, 1988 by the depositor – reg.

    If I deposit Long TermCapital gains in the specified Nationalised Bank derived out of house sale proceeds under the Capital Gains Account Scheme, 1988, after two years or three years and if I intend to close the same without purchasing house/site or constructing house, whether said Capital Gain is Taxable or not.

    Or if I invest the said LongTerm Capital Gains in specified Infrastructure bond before two years by transferring the amount deposited in the specified Nationalised Bank derived out of house sale proceeds under the Capital Gains Account Scheme, 1988, whether said Capital Gain is Taxable or not. Kindly clarify.
    (Y.D. Swamy).

    After 2 or 3 years or depositing of capital gains in the specified Nationalised Bank in LTCG A/c, can I close without purchasing house property and reinvest in Infrstructure bonds, is it taxable ?

  2. adarsh says:

    I have opened capital gains deposit account on december 30, 2020 with the entire sales consideration received on sale of an ancestral property. On further research i have found out that i have infact made a loss through the sale (as per inflation and market value as on April 01, 2001). So Can i now move the amount in capital gains deposit amount to a normal deposit and what is the process for the same. Thanks a lot for the advice!

  3. viswanath reddy says:

    I am confused btwn withdrawal & closure of account under CGAS.. What i understood is withdrawal means premature withdrawal ( Type B) and Closure means the proceedings you will get at the time maturity.. pls clarify

  4. Gautam says:

    I have sold my house in July 2019, till when I have to deposit the money in capital gain account. My plan is to reinvest in house but it after 2 years, please suggest me which type of account should I opened.& beneficial to me?

  5. A P Pandit says:

    I had opened capital gains AC with BOB, upon discussion with their senior manager, since I had current AC same branch and had no idea on the CAGS procedure.
    My CA now says that the AC has no clear mention of AC being CAGS and the Bank says we do not issue letters to confirm the same. How do I resolve this issue for filing 2018 returns

  6. Mahendra Shah says:

    I sold my flat in say Value Rs.N.00 and by unknowingly rule I deposited this whole amount Rs. N.00 in LTCG account instead 70 % of Rs.N.00.
    Now I am willing to buy a flat through a Bank auction where I have to pay around 30 % of my LTCG deposit amount Rs. N.00 within 24 hours of Bidding . Now How it is possible ? (1) Can I or Bank transfer this (10% +25 % ) = 35% amount to seller Bank ? (2) How can I withdraw balance 65% amount after paying 1st 35 % ?
    Please guide

  7. P jha says:

    I have one house in Kolkata and one plot of land . I am considering to buy another house from sale proceeds of plot . I have sold the plot and money received . I intended to deposit proceeds in capital gain account . My query is
    1 is 2 houses ok
    2 . Sale proceeds to be deposited or capital gain only.
    3. In case I don’t buy 2nd flat what will be the position on expiry of 2 years .

  8. JP Steinmann says:

    In the article, 28 banks are mentioned to be authorised for capital gains accounts. Only 21 are listed! Which are the remaining 7 banks?

  9. Krishna Deo Singh Chauhan says:

    If the person opening the account already has 2 residential properties in his name (after selling the property on which the CGT is to be saved), does the operation of CGAS account differ, or does it make no difference. Thanks for any guidance.

  10. SHASHI KANT says:

    i want to open capital gain tax account with axis bank of rs 20 lacs. please guide the process or can we open this account with axis bank ???

  11. sandhya lulekar says:

    The banks hesitate to open such account .They dont know the procedure of capital gain deposit on their system .I have worst experience in SBI and Syndicate Bank

  12. RK BHIUWALKA says:

    All subsidiary banks such as State Bank of Mysore, State Bank of Hyderabad, State Bank of Patiala etc.have been merged with State Bank of India. None of these banks exists.


    Please do the necessary correction.

  13. n n parekh says:

    i have opened a capital gain account in my name one name now can it be possible to add the name of may son in this account .. my age is 84 tearsnnparekh

  14. srikanth says:

    Goodday.Pls clarify last date for opening Capital gains scheme account if property sold on 18th Dec 2017 ( date of sale deed -18.12.2017)

  15. Pushkar Bhatt says:

    Sir I hv sold an ancestral land and want to invest taxable amount in house property and balance in baonds…but erroneously I have deposited entire 80 lacs in cgas whereas 60 lacs was meant for buying property and balance 20 lacs to invest in purchasing nhai exempt bonds. But since in cgas 1988 it’s mentioned that whatever amount deposited in cgas account can only be utilised to purchase property I am in a dilemma…how can I use 20 lacs deposited in cgas ac for purchase of nnhai exempt bonds without attracting tax on this withdrawal??? Pls help urgently


    Dear Sir,

    You have not covered the case of LTCG wherein the amount i finalise after indexed values is put in govt infrastructure bonds straight away upto the tune of rs. 50 lakhs. the balance amount i calculate IT at 20 % and pay the IT. do is still need a CGAS to be opened in a bank?

  17. Kumar says:

    My father property sold on july 2016 and got my share and immediately put in fixed deposited. I am not aware of captial gains account. Till now in fixd deposit.
    Please suggest now, how to save tax?
    Please kindly advise.

  18. Vaibhav says:

    what are the implications if an assessee has deposited the amount in savings account instead of CAGS and return for the FY is yet to be filed ? Will it be taxable as LTCG ?

  19. vinay says:

    sir, i have to sell a property but the buyer was making a payment in advance and the final payment will be made in 4 to 5 months. the advance which received was deposited in my normal saving a/c or to open under LTCG in bank. later i want to invest the full amount under the scheme of 54EC. please advice

  20. VED PRAKASH says:

    i have purchased a property in year 2000 and sold the same in august, can i save capital gain tax without purchasing a new property

  21. puneet says:

    I have an Capital gains account in SBI. Which form is required to be filled for partial withdrawal, complete withdrawal ?
    also guide what all documents are required by the bank to allow withdrawal and which income tax office can approve the closing of bank account.

  22. Mohammed says:

    Capital gain account was opened in a nationalized bank by my father in law aged 75, and nominee is his son aged 40, and it was utilized for constructing a building for their wards for their own use,part payment was issued to build almost 50% of the amount,now my father in law was expired 3month back,we got legal heir certificates,and no objecting certificate,to receive the balance amount to compete the project,but the bank is delaying for disbursing the amount,sir what is the procedures to get the amount earlier,we are residing at chennai,plz reply

  23. Sivanarayanan Sekar says:

    Can I withdraw for the purpose of buying a second hand house (approx 15 years old )instead of new house please

  24. Jai Singh says:

    i have sold a flat tin Mar 17 which was bought about 20 years ago.
    I intend to deposit the amount received from the sale in a capital gain account scheme.
    Can somebody please guide me how much do I depoisit in the capital gain account scheme, the complete proceeds or only the capital gain on the sale.

  25. Jai Singh says:

    I am planning to sell my property(Flat) for Rs.(47 Lakh) before Mar,17 which I bought in the year 1996 for Rs.(4 Lakh). I will be buying a flat of value around (90 lakhs) within a year or next year. Should I open Capital Gain Account immediately or at what time. Please suggest

  26. Ravindra babu says:

    I have deposited the money as FDR’s under “Deposit account-B” for 12 months. The bankers have renewed the deposits only after 9 months on the expiry of the FDR’s (after12 months of deposit) for a further period of 12 months. Under the INTEREST’s as per Capital Gains ccount Scheme 1988, the interest {8 (1)} at such rate as may be specified by the RBI, from time to time…………
    Here the bankers have not informed nor auto renewed the deposit which lead to loss of interest for a period of 9 months. Please confirm whether the bankers are liable for the non payment of the right interest. Is it not amounting to Service Deficiency to the customer

  27. Vedpal Singh says:

    Hi Ranganathan,

    I want to dis invest amount in CGAS a/c to buy another property, and want bank to do RTGS directly to seller, but bank has refused to do RTGS and they do DD only. I will have to pay huge commission to get DD which i want to avoid. I feel that bank is arm twisting me to purchase a DD. Would you pls tell me which was your bank that had no issue with RTGS.


  28. Sachin Bharti says:

    I am planning to sale my property for Rs. 8200000 (82 Lakh) which I brought in the year July-2010 for Rs. 37,21,718.00 when its govt. value was 29, 35,000. I will be buying another property of value around 1,40,00000.00 (1 cr 40 lakhs approx) in immediately within a year or next year. Do I need to pay any capital gain on the difference amount of my purchase & sale price.


    i am invest money 9 lacs in acre buy back scheme in 2013 for 2.5 years guaranteed return amount rs 14.25 lacs please inform about income tax of above intrest

  30. nand kishor varma says:

    I HAVE SOLD MY FLAT IN KOLKATA IN JUNE2016 FOR RS.17LACS WHICH WAS PURCHASED IN JANUARY 2005 FOR RS.6.85LAC & INCURRED RS.3LACS ON RENOVATION.NOW i want to purchase a portion of property owned by my son in mumbai with that amount of money received.Will iI have to pay any tax now if I pay the full amount to my son.plz.advice

  31. Vinay Oza says:


  32. Ayush Sarda says:

    Can I utilise the amount received from Sale of Capital asset in contruction of 2 additional floors on my existing house. Well in this case will I be able to claim exemption?

  33. Abhijeet A says:


    I am planning to sale my property (land) and wanted to buy a flat immediately in next 1 year. I am currently living in a rented house and this is going to be my 1st flat / residential property. Also note that, i am looking for a under construction flat for which i will receive possession in next 2 years. I am planning to use money received through land to make payment for this flat as and when construction progress. I am already having an saving bank account in SBI. Do i still have to open CGAS account considering above situation.

    Kindly guide.

    Thanks and Regards,

    Abhijit Arankalle

  34. Ashok says:


    Need your reply urgently.

    We bought two plots in 2006 and from which one of them we sold in Dec2014 and the other one we sold in Feb2016. After indexation the capital gain tax is 21 lakh including both.
    Meanwhile in May 2015 i have done an agreement for a under construction flat for 40lakh.

    Need your help to understand if i can save capital gain tax arising from plots, by clubbing both the gains and buying one under construction flat.

    Thanks in advance, will appreciate your kind help.

  35. satish pandey says:

    I have sold my flat in 6th april-2015. we should to invest in capital gains accounts scheme 1988 for tax savings. What is last date of deposit 6 april-2016 on or before 31 july-2016

  36. chandra says:

    Hi ,
    We have sold our property three years back .
    the money was deposited in Capital Gain account in mothers name. but after three years we coudnt utilze the money.
    Now mother is 82 and we have no plans to purchase the house.
    Now that if we want to withdraw and close the account , we have to pay 20 % tax.
    Is there any way to save the tax now?

  37. Arvind Bhaskar Rane says:

    I have received bad experience in capital gains fixed deposits with central bank of India and I am still struggling to withdraw this fixed deposits amount as there are different opinions while withdrawal of amount once the person who opened account and at maturity if he is not exist or he is expired
    Income tax department is helpless as they don’t have any statutory procedures once person expired before maturity of capital gains fixed deposits account
    Please insure with tax consultant first before going to invest in this capital gains account scheme

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