Government Allows 19 Banks for Capital Gains Account Scheme, Know what is CGAS and Benefits!!

The Finance Ministry has made an important change to the Capital Gains Account Scheme (CGAS). For the first time ever, 19 private sector banks have been authorised to accept CGAS deposits. Earlier, this facility was available almost exclusively in public sector banks and IDBI Bank, except for rural branches. Some of the major private banks now included are HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank, IndusInd Bank and Yes Bank.

However, one condition remains unchanged: rural bank branches cannot offer CGAS accounts. Only branches located in areas with a population of more than 10,000 (as per the 2011 Census) are allowed to operate the scheme. To understand this, first let’s understand – What is Capital Gains Account Scheme (CGAS)?

What is Capital Gains Account Scheme (CGAS)?

The Capital Gains Account Scheme (CGAS) is a special scheme created by the Government of India that allows taxpayers to temporarily park their capital gains so they can still claim tax exemption later. When someone sells a property, land or any long-term asset, they may have to pay capital gains tax. But if they want to save tax by buying or building a new property, they are given some time to do it (for example, 2–3 years). During this waiting period, if they haven’t yet bought the new property, they must keep the money in a CGAS account; otherwise, they lose the tax exemption. So CGAS acts as a safe parking account for capital gains until the taxpayer completes the reinvestment. So this is a good scheme to save tax on money acquired through the sale of property.

The following banks have been added to the list of authorised institutions under CGAS:

1. HDFC Bank Ltd
2. ICICI Bank Ltd
3. Axis Bank Ltd
4. City Union Bank Ltd
5. DCB Bank Ltd
6. Federal Bank Ltd
7. IDFC FIRST Bank Ltd
8. IndusInd Bank Ltd
9. Jammu and Kashmir Bank Ltd
10. Karnataka Bank Ltd
11. Karur Vysya Bank Ltd
12. Kotak Mahindra Bank Ltd
13. RBL Bank Ltd
14. South Indian Bank Ltd
15. Yes Bank Ltd
16. Dhanlaxmi Bank Ltd
17. Bandhan Bank Ltd
18. CSB Bank Ltd
19. Tamilnad Mercantile Bank Ltd

What’s New in the CGAS Rules?

The government has also expanded the scope of CGAS by adding Section 54GA. This allows individuals to deposit capital gains that arise from shifting an industrial unit from an urban area to a Special Economic Zone (SEZ). Earlier, the main benefit was under Section 54, which exempts long-term capital gains tax when a person sells a house or plot and reinvests the money in a new residential property within the allowed time. CGAS acts as a temporary parking place for capital gains during the “waiting period.” This is the time between selling an existing asset and buying or constructing a new qualifying asset. Keeping the money in CGAS helps the taxpayer continue to qualify for capital gains tax exemption.

Types of CGAS Accounts

CGAS offers two types of accounts:

1. Account-A (Savings Type)

• Works like a regular savings account.
• Allows withdrawals whenever needed.
• Earns savings account interest.

2. Account-B (Term Deposit Type)

• Functions like a fixed deposit.
• Can be cumulative (interest paid at maturity) or non-cumulative (interest paid periodically).
• Withdrawals are allowed only after maturity.
• Deposits can be made once or in multiple instalments, but only up to the income tax return due date under Section 139(1).

Key Features of Capital Gains Account Scheme (CGAS) Scheme

Minimum and Maximum Amount

• Minimum deposit: ₹1,000
• No upper limit on deposit amount
• Deposits can be made at once or in instalments until the return filing due date

Time Limit to Use the Money

• The taxpayer must purchase or construct the new property within 2 to 3 years from the date of selling the original asset.
• This period depends on whether the taxpayer is buying or constructing the new property.

Maturity Options

1. Cumulative – Interest is added to the deposit and paid at maturity.
2. Non-cumulative – Interest is paid periodically (monthly/quarterly).

Minimum Lock-In

• 7 days for cumulative deposits
• 6 months for the income (non-cumulative) option

Auto-closure

• If the account is not renewed, it automatically closes after the maturity period ends.

Other Important Rules

No Loan Facility

You cannot take a loan or overdraft against a CGAS deposit. The money cannot be used as collateral or margin for any banking facility.

Penalty for Early Withdrawal

If someone wants to withdraw before maturity:

• 1% penalty applies
• Withdrawal is allowed only after submitting the required forms
• The bank must ensure that the money will be used only for eligible reinvestment (as per the Income Tax Act)