Why in the news?
The Ministry of Finance has notified the Capital Gains Accounts (Second Amendment) Scheme, 2025, introducing major changes to the existing Capital Gains Account Scheme (CGAS), 1988. The amendments aim to modernise processes, expand banking access, and increase clarity for taxpayers seeking capital gains exemptions.
About Capital Gains Account Scheme (CGAS), 1988
- Launched by the Central Government in 1988.
- Objective: To help taxpayers claim exemptions on long-term capital gains when reinvestment cannot be completed before the ITR filing due date.
- Linked mainly to Section 54, 54F, and related provisions of the Income Tax Act.
Why CGAS is Needed?
- Exemption requires reinvestment of capital gains within:
- 2 years (purchase of property)
- 3 years (construction of property)
- If this period extends beyond the ITR filing deadline, the taxpayer can temporarily deposit unutilised gains in CGAS to keep the exemption claim valid.
Important Conditions
- Deposit must be made before filing Income Tax Return.
- Money deposited is treated as reinvested for exemption.
- If the amount is not utilised within the stipulated period, it becomes taxable long-term capital gains in that year.
- Only long-term capital gains qualify — short-term gains are NOT eligible.
Who Can Deposit in CGAS?
- Any person with long-term capital gains, including: Individuals, HUFs, Companies, Firms, Trusts, and Any eligible taxpayer seeking exemption
- Mainly used by property sellers who need more time to reinvest.
Capital Gains Accounts (Second Amendment) Scheme, 2025 — Key Changes
- Expansion of Authorized Banks: Previously limited mostly to Public Sector Banks + IDBI Bank.
- Now extended to 19 private and small finance banks at all non-rural branches.
- Non-rural branch condition: Branch must be located in an area with population ≥ 10,000 (2011 Census).
- Rural branches cannot open CGAS accounts.
- Wider Definition of Electronic Payments: Electronic deposits can now be made through: Credit cards, Debit cards, Net banking, IMPS, UPI, RTGS, NEFT and BHIM Aadhaar Pay.This modernises the earlier narrow definition of “electronic mode”.
- Online Closure of CGAS Accounts (From April 1, 2027): Closure requests can be submitted electronically using:
- Digital Signature (DSC)
- Electronic Verification Code (EVC)
- Earlier: Closure only through physical branches.
- Clarification on Effective Date of Deposit: For cheque/DD/electronic transfers, the date of receipt of the payment instrument along with account application at the Deposit Office is treated as the effective date.Removes ambiguity around last-day deposits for tax exemption.
- Electronic Statements Permitted: Banks can now issue electronic statements instead of physical passbooks.
- Aligns CGAS with general digital banking norms.
- Extension of CGAS to Section 54GA: CGAS can now be used for exemptions under Section 54GA:
- Relates to capital gains arising from shifting an industrial undertaking from an urban area to a Special Economic Zone (SEZ).
- Broadens applicability beyond property-related reinvestments.
- Relates to capital gains arising from shifting an industrial undertaking from an urban area to a Special Economic Zone (SEZ).
| Consider the following statements: (2025)
I. Capital receipts create a liability or cause a reduction in the assets of the Government. II. Borrowings and disinvestment are capital receipts. III. Interest received on loans creates a liability of the Government. Which of the statements given above are correct? (a) I and II only (b) II and III only (c) I and III only (d) I, II and III |
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