Capital Gains Account Scheme: the deposit deadline is the return due date, not the reinvestment deadline
You sold a property in March and have two years to buy the next one. That is true. What is not true is that you can keep the money in your savings account until then. If it is not in a CGAS account by the return due date, the exemption is gone.
Prabhakar Kumar
Chartered Accountant (ICAI, Nov 2019)
📅 16 Aug 2026
⏱ 5 min read
1,089 words
You sold a property. Under Section 54 you have two years to buy the next one, or three to build. That much is correct, and most people know it.
What most people do not know is that the money cannot simply sit in your bank account in the meantime.
If it is not deposited into a Capital Gains Account Scheme account by a specific date, the exemption is lost — even though your two-year window is still wide open.
Identify your return due date — that, not the reinvestment window, is your deposit deadline
If you plan to file early, the deadline moves earlier with you
Open the account before that date, using Form A, at an authorised bank branch
Choose Type A or Type B from your payment timeline, and split if it helps
Withdraw only against actual payments, remembering the 60-day rule
If reinvestment looks unlikely, plan the tax for the year the window expires
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By when does the money have to be deposited in a CGAS account?
On or before the earlier of two dates — the due date for filing your return under Section 139(1), or the date you actually file the return. Whichever comes first. Missing that date disqualifies you from the scheme, and with it the exemption, even though your reinvestment window under Section 54 or 54F may still be running.
Which exemptions does CGAS support?
Sections 54, 54B, 54D, 54F, 54G, 54GA and 54GB. These are the reinvestment exemptions on long-term capital gains. Short-term gains are not eligible at all, and neither is Section 54EC, which works through bonds rather than through a deposit account.
What is the difference between Type A and Type B accounts?
Type A is a savings account, offering ordinary savings interest and unrestricted withdrawals. Type B is a fixed deposit, offering term deposit rates with a maximum term of three years, and restricted liquidity — premature withdrawal is only allowed after transferring the balance to a Type A account. Which suits you depends on how soon you expect to need the money.
Which forms are used?
Form A to open the account, in duplicate. Form C for the first withdrawal and Form D for subsequent withdrawals. Form B to convert between account types. Form G to close the account, which requires the Assessing Officer's approval. Form H where a nominee is closing it, and Forms E and F for nomination and changes.
How long can the money stay in the account?
Only as long as the underlying exemption window allows — two years for purchase or three years for construction under Section 54, for example. The account itself is not the deadline; the exemption's own reinvestment period is. A Type B deposit runs for a maximum of three years.
What happens to money I withdraw but do not use?
Amounts withdrawn have to be applied to the intended purpose within 60 days. Withdrawing money and leaving it idle in a normal account does not preserve the exemption, and this is a trap because the withdrawal itself feels like progress. Withdraw when you are ready to pay, not before.
When does unutilised money become taxable?
In the year in which the reinvestment period expires. So a gain from FY 2025-26 with a two-year purchase window becomes taxable in the year that window ends, not retrospectively in the year of sale. That timing matters for planning, because the tax lands in a year you may not be expecting it.
Can I close the account before the period ends?
Closure requires the Assessing Officer's approval through Form G. You cannot simply withdraw the balance and shut the account at a bank counter. Plan for that step to take time, and do not commit the money elsewhere on the assumption that closure is immediate.
⚖️ THE AUTHORITIES
The case law on s.54F and s.54
Every proposition in this article traces to a decision or an instrument. They are all on TaxSphere, free, with the source linked on each one.
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