Unutilised CGAS funds: Don't let 3-year exemption deadline trigger tax notice

Tax exemptions under Sections 54 and 54F of the Income-Tax Act, 1961 require reinvesting capital gains in a new residential property within three years of the original asset's transfer date.

Money deposited in a CGAS (Capital Gains Account Scheme) account does not indefinitely defer tax; the exemption expires automatically if unutilised after three years.

Unutilised balances in a CGAS account become taxable immediately at the end of the three-year period, even if the funds remain in the account.

Section 54 applies to long-term gains from selling a residential house, requiring reinvestment of the capital gains; Section 54F applies to non-residential assets, requiring reinvestment of the net sale consideration.

Taxpayers who previously claimed exemptions under these sections must evaluate their CGAS deposits for the Assessment Year 2026-27 filing deadline to report any newly taxable gains.