Capital Gains Account Scheme: A Question-by-Question Guide for Property Sellers
A sale that produces a large profit raises one question straight away: how can the tax on it be avoided, legally, by buying another home? The answer has a catch for sellers in Bangalore, because the return is due before most replacement homes are ready. Here is how the government's gains account bridges that gap, in the order in which a seller meets its rules.
First, Check Whether the Exemption Applies
The route opens up through two exemptions. One is for the long-term gain on selling a house. The other is for the gain on selling a plot or a different long-term asset, provided the sale price goes into a house. Since 1 April 2026 the numbers are 82 and 86 in the Income-tax Act, 2025, but sellers and accountants still say 54 and 54F.
A seller who buys capital gains bonds is on a different track with its own six-month limit. So is a seller whose new home has already been paid for in full before the return is filed.
Then, Know How Much to Park
Where a house was sold, the gain alone must be reinvested, so the amount parked is whatever part of the gain is yet to be spent. Where the exemption is the plot-or-asset one, the entire net sale price must be reinvested, and the part not yet spent is what goes into the account for a full exemption.
Next, Mind the Deadline
Deposit ahead of filing, and in any case by the last permitted filing date. People with no business income have until 31 July following the end of the financial year, so a 2026-27 sale means 31 July 2027, unless an extension is announced. Late filing followed by a deposit can forfeit the exemption.
The clock stops when the bank takes the payment together with the form. The separate period for the new home runs two years for buying and three for building. The scheme itself dates from 1988.
Choose the Account
The two types differ in access, earnings and purpose:
| Point of comparison | Account A | Account B |
|---|---|---|
| Nature | Savings deposit | Term deposit that accrues interest or pays it out in stages |
| Access to money | On application, as bills come due | Only after a transfer to A |
| Earnings | Savings rate | Term rate |
| Good for | Instalments owed to a builder | Funds that will wait |
Moving a term deposit early means a lower rate and a 1% penalty. Tax is deducted at source on the interest, which counts as the depositor's income. Splitting the money between both is common.
Open It
An application on Form A goes to an authorised branch, together with PAN, identity and address proof, and the sale deed. Convenience matters because withdrawals and closure happen at that branch.
The 19 November 2025 amendment made four changes:
- Banks notified by the central government may accept deposits, widening the choice beyond public sector banks
- Payment is possible by cheque or draft, or through card, UPI, IMPS, NEFT, RTGS and net banking
- An electronic statement can replace the passbook
- From 1 April 2027 closure requests go in online, with a digital signature or verification code
Co-sellers each open an account and put in their individual share of the profit. Pooling the money in a single account does not work.
Spend It
Form C requests a withdrawal from A, and the cash may be used only for the house. Each withdrawal after the first comes with Form D describing how the last one was used.
Anything above Rs. 25,000 is paid by crossed demand draft to the party being paid, such as the builder. That party has 60 days to use the funds, and any leftover goes straight back into A. The balance cannot be offered as loan security, and the bank gives neither a cheque book nor a debit card.
Close It
After the property is paid for, or if the plan is dropped, apply on Form G with your assessing officer's written approval. If the depositor has died, Form H is submitted by the nominee or legal heir.
Approval is not quick, so begin right after the last payment. The officer's letter also shows what share of the deposit was spent on the property.
And If the Plan Falls Through
The tax is only delayed, not removed, unless the house is bought or built on time. Money left in the account is then charged as a capital gain for the year when three years have passed since the sale. For the plot-or-asset exemption, the charge is proportionate to the share of the sale price left unused.
A seller who is not sure about reinvesting may prefer to pay the tax now or use bonds, since the account holds the money to one purpose for the entire period. Decide early which way to go.
Keep the Proof
Ask the bank for an acknowledgement that shows the date on which the deposit was received. That date is what proves the money went in before the return was filed. Keep it with the sale deed and the new home's payment receipts, because the assessing officer may ask for all of them when the account is closed.
Short Checklist
After the sale deed is registered, go through these in order:
- Find the long-term gain and confirm the matching exemption for the asset sold
- Write down the filing due date as the deposit deadline
- Net off spending on the new home, then deposit the balance
- Split the amount between A and B in line with the builder's schedule
- Keep each receipt, each demand letter and every Form D
- Mark both limits, two years and three years, and request closure when payments end
The rules are the same for sellers abroad, though NRI sellers must also budget for tax withheld by the buyer. Let a chartered accountant do the working before the money goes in, since an error in either figure or date is hard to correct.
