Capital Gain Deposit Account Scheme
The capital gain deposit account scheme is what you use when you have sold an asset, intend to reinvest the gain, and the deadline for filing your return arrives before you have done it. The money goes into a designated account at an authorised bank, which keeps you eligible for the relief past the filing deadline. It does not secure the relief by itself: that still depends on meeting the provision’s own conditions and spending the money within the permitted window.
It is a holding pen with a clock on it, not a savings product. Two things about it are routinely left out: the deposit has to be made before the return is filed, not merely in the same year, and the money in it cannot be borrowed against.
The scheme serves several reinvestment reliefs, and their conditions differ. This page works through the one most people meet, the relief on a residential house in Section 82 of the Income-tax Act 2025. Where you are claiming a different relief, the deadline logic is similar but the eligibility and the consequences are not necessarily the same.
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When the capital gain deposit account scheme applies
Reinvestment relief comes with its own timetable, and the deposit exists to bridge the gap. Section 82 of the Income-tax Act 2025 gives the relief where the gain from a residential house goes into another one, and it opens with three conditions.
The section applies “where an individual or Hindu undivided family” has long-term capital gains from the transfer of a residential house, the income of which is chargeable under the head income from house property. A company does not qualify. Neither does a short-term gain, nor a plot with nothing on it.
The windows it allows are longer than a filing season.
Sell in June and your return falls due months later, while the three-year construction window has barely started. The deposit is what keeps the relief alive in that gap.
Two statutory limits sit on top of the windows, and both are easy to miss.
A ₹10 crore ceiling. Sub-section (7) provides that where the cost of the new asset exceeds ten crore rupees, “the amount exceeding ten crore rupees shall not be taken into account”. Sub-section (8) applies the same exclusion to the capital gain itself.
Two houses, once, below ₹2 crore. Where the capital gain does not exceed two crore rupees, sub-section (5) allows the assessee to “purchase or construct two residential houses in India”. Sub-section (6) then bars exercising that option again, for that tax year or any other.
Where the gain is equal to or less than the cost of the new asset, the section provides that no capital gains are charged under section 67, subject to its conditions.
Selling the new house too soon undoes part of it. If the new asset is transferred within three years of its purchase or construction, the section adjusts its cost for that later sale. Where the original gain exceeded the new asset’s cost, that cost is treated as nil. Where the gain was equal to or less than it, the cost is reduced by the amount of the gain. Either way the gain on the second sale is larger than it would otherwise have been.
The deadline is the return, not the year
Before you file. The section is specific: a deposit of unutilised capital gains must be made in a specified bank or institution under the scheme notified by the Central Government, and “such deposit shall be made before the filing of the return and not later than the due date applicable”.
Two readings of that sentence matter, and people get caught by the first.
It is the earlier of two dates. If you file in July and the due date is later, the deposit had to be in by July, because you filed. Filing early shortens your own deadline.
It is not the end of the financial year. The money sitting in your ordinary bank account on 31 March does not count. It has to be in the designated account.
Miss it and the relief for that portion goes, whatever you do with the money afterwards. The wider filing timetable is set out in income tax on investments in India.
What the account will not let you do
Borrow against it. Banks running the scheme state plainly that no loan is available against the deposit and that it cannot be pledged as margin money or as collateral. An ordinary term deposit at the same bank can do all three.
That is the clearest way to understand what this account is.
| Ordinary fixed deposit | Capital gain deposit account | |
|---|---|---|
| Loan against it | Usually, subject to the bank’s terms, commonly up to 90% of value | No, on the terms published by the bank cited below |
| Use as collateral or margin | Usually | No |
| Withdraw freely | Yes, with a penalty | Only for the stated purpose, on the prescribed form |
| Why it exists | To earn interest | To hold a gain until it is reinvested |
Terms vary between banks, so read the ones your bank publishes rather than assuming the row above describes every account.
The money is yours and it earns interest, but it has been set aside for a declared purpose and the bank administers it against that purpose. If you need liquidity from a deposit, a loan against a fixed deposit is the facility that does that, and this is not it. How ordinary fixed deposits work is a separate question.
The two kinds of account
One behaves like a savings account, the other like a term deposit, and most banks offer both. Which suits depends on when you expect to spend the money rather than on anything about the tax relief, which is identical either way.
The savings-type account allows withdrawal on the scheme’s prescribed form when you need to pay for the new asset, with the passbook produced alongside it. Access is not free-form: the scheme sets out which form applies, and money taken out has to go to the permitted purpose within the applicable period. Your bank will tell you which form its branch requires.
The term deposit account pays a higher rate and locks the money for a chosen tenor. Banks offer it with a maturity option and an income option, the second paying interest out periodically. Breaking it early carries a penalty. Punjab National Bank publishes one percentage point off the applicable rate; other banks set their own, so check before you choose a tenor.
Banks label these differently on their own sites, so compare the mechanics rather than the names. What does not differ is the tax treatment or the purpose test.
What happens if you never reinvest
The gain comes back as income. Section 82(4)(a) is direct about it: where the deposited amount is not used in time, “the unutilised amount shall be charged to tax under section 67”, in the tax year the three-year period from the transfer ends.
Sub-section (4)(b) still lets you withdraw the money itself.
Note what that means for timing. The tax does not go back to the year you sold. It lands in the later year, when the window closes, and it is reported in that year’s return.
This is the Section 82 position, not a universal rule. The scheme covers other reliefs, and under those the unused amount may be charged as a long-term or a short-term gain depending on what the original gain was. Which provision you are under decides the answer, so confirm it rather than carrying this across.
So the account defers the consequence while its conditions are met. Depositing the money does not make the exemption permanent.
Four practical points
Authorised banks only, intention counts for nothing, interest is taxable, and dates decide everything. None of these is obvious from the scheme’s name, and each one has caught people out at the point where it was too late to fix.
Only authorised banks offer it. The Income Tax Department describes these as special-purpose accounts opened with an authorised bank. Not every branch of every bank handles them, so confirm before you plan around it.
The exemption follows the deposit, not the intention. Telling your accountant you plan to reinvest does nothing. The money has to be in the account by the deadline.
Interest earned is your income. The deposit shelters the capital gain, not the interest the account pays. That interest is taxable under the ordinary rules, and when it is recognised can depend on your own method of accounting.
Keep the sale documentation. The relief turns on dates — the date of transfer, the date of deposit, the date of purchase or completion. Those dates will be tested against documents, not recollection.
Your own position depends on which asset you sold and which relief you are claiming, and the provisions differ between them. Confirm it with a chartered accountant before relying on any of this.
Common Questions
A designated account at an authorised bank where you place a capital gain you intend to reinvest but have not yet spent. It preserves the reinvestment exemption past the filing deadline, and the money can be withdrawn for the stated purpose within the permitted window.
Before you file your return, and no later than the due date that applies to you. Whichever comes first is your deadline, so filing early brings it forward. The end of the financial year is not the test.
No. Punjab National Bank’s published terms for its capital gain deposit state that no loan is available against it and that it cannot be used as margin money or as collateral. An ordinary fixed deposit is usually available for those purposes, though that too depends on the bank’s own terms.
Under Section 82, the unutilised amount is charged to tax under Section 67 in the tax year in which the three-year period from the transfer ends, rather than in the year you sold. Other reliefs covered by the scheme can be treated differently, so confirm which provision applies to you.
Under the residential house provision, two years from the date of transfer to buy, or three years to build. The account can hold the money across that period.
The savings-type account allows withdrawal on the prescribed form when you need the money. The term deposit pays more and locks it for a tenor, with a penalty for breaking early. The tax position is the same either way.
No. The scheme shelters the capital gain you deposited, not the interest the account earns. That interest is taxable under the ordinary rules, and the year in which it is recognised can depend on your method of accounting.
Only at authorised banks, and not necessarily at every branch. Confirm with the bank before you rely on it, particularly if your deadline is close.
Disclaimer: The views expressed here are of the author and do not reflect those of Dhanvantree. Mutual funds are subject to market risks, please read the scheme documents carefully before investing.