The Capital Gains Account Scheme (CGAS) was designed to help taxpayers claim capital gains tax exemptions when they are unable to immediately reinvest proceeds from the sale of assets. In theory, it is a powerful tax-saving tool. In practice, however, thousands of ITR filers continue to struggle with compliance, reporting, and procedural hurdles.
With Budget 2026 approaching, tax experts have flagged multiple structural issues in the CGAS framework and have suggested targeted reforms to simplify compliance, reduce errors, and align the scheme with India’s increasingly digital income tax ecosystem.
This article explains why taxpayers are facing difficulties with the Capital Gains Account Scheme, what experts want the government to change in Budget 2026, and what ITR filers should do in the meantime.
What Is the Capital Gains Account Scheme and Why It Matters
The Capital Gains Account Scheme allows taxpayers to temporarily park capital gains if they are unable to reinvest them before the income tax return filing deadline. Deposits under CGAS help taxpayers claim exemptions under Sections 54, 54F, and related provisions of the Income Tax Act.
For many property sellers and investors, CGAS plays a critical role in preventing large, upfront tax outflows. Experts estimate that the scheme helps taxpayers save thousands of crores in capital gains tax each year, making it a key pillar of capital gains planning in India.
Why ITR Filers Are Struggling With CGAS
1. Manual and Bank-Dependent Process
One of the biggest problems with CGAS is that it remains largely manual and bank-dependent. Taxpayers must open CGAS accounts only with designated banks, primarily public sector banks, and track deposits and withdrawals themselves.
According to tax experts, the lack of seamless digital onboarding makes the process time-consuming and inconsistent across banks.
2. Limited Banking Access
Although a few private banks have been added recently, CGAS is still not available across all major banks. This limits accessibility for taxpayers who primarily operate through private or digital-first banks.
Experts argue that this partial expansion does not solve the fundamental access problem, especially for tech-savvy taxpayers who rely on online banking channels.
3. No Integration With Income Tax E-Filing Portal
Currently, there is no direct linkage between CGAS data maintained by banks and the Income Tax Department’s e-filing ecosystem. Taxpayers must manually report CGAS deposits and withdrawals while filing their ITR.
This manual reporting increases the risk of errors, mismatches, and incorrect classifications, often resulting in notices or scrutiny from the tax department.
4. Difficulty in Tracking Deposits and Utilisation
Taxpayers often struggle to track CGAS deposits and utilisation across multiple financial years. Since data is not auto-populated in ITR forms, taxpayers must rely on self-maintained records.
Chartered accountants have pointed out that this becomes especially problematic when withdrawals span different assessment years, increasing the likelihood of reporting mistakes.
5. Procedural Delays Can Jeopardise Exemptions
CGAS withdrawals and reinvestments are subject to procedural approvals. Delays at the bank level or documentation errors can sometimes jeopardise capital gains exemption claims altogether.
Experts believe that such procedural risks undermine the very purpose of the scheme—to provide flexibility to taxpayers.
What Experts Want Changed in Budget 2026
With Pre-Budget 2026 discussions gaining momentum, tax experts have outlined several practical reforms that Finance Minister Nirmala Sitharaman could consider.
1. Online CGAS Account Opening Linked to PAN
Experts recommend enabling online CGAS account opening through the Income Tax Portal, directly linked to the taxpayer’s PAN. This would eliminate paperwork and reduce onboarding delays.
2. Integration With Income Tax E-Filing System
Another key demand is full integration of CGAS deposit and withdrawal data with the Income Tax e-filing portal, allowing auto-population of relevant schedules in ITR forms.
This step alone could significantly reduce ITR filing issues related to capital gains reporting.
3. Allow CGAS Accounts With All RBI-Regulated Banks
Experts have suggested allowing CGAS accounts to be opened with all RBI-regulated banks, not just a limited set of public sector institutions. This would improve accessibility and user experience.
4. Simplified Declaration Format in ITR Forms
Tax professionals also want a simplified CGAS declaration format within ITR forms. This would reduce manual errors, improve auditability, and align CGAS reporting with AIS and TIS data.
5. End-to-End Digitisation of CGAS
Several experts have called for complete digitisation of the Capital Gains Account Scheme, including digital withdrawals, utilisation tracking, and real-time validation through the income tax system.
What Taxpayers Should Do Until Reforms Arrive
Until CGAS reforms are implemented, taxpayers should take proactive steps:
- Maintain detailed records of CGAS deposits and withdrawals
- Reconcile bank statements with ITR disclosures carefully
- Track utilisation timelines to avoid exemption lapses
- Seek professional review before filing returns involving capital gains
These steps can help reduce compliance risk during Income Tax e-filing.
Why Budget 2026 Matters for Capital Gains Taxpayers
Budget expectations 2026 are particularly high among capital gains taxpayers, as CGAS-related pain points have persisted for years. Any move towards digitisation and integration would align with the government’s broader digital tax administration agenda.
If addressed, these reforms could significantly reduce compliance friction and make capital gains planning more predictable.
Frequently Asked Questions (FAQs)
What is the Capital Gains Account Scheme?
The Capital Gains Account Scheme allows taxpayers to park capital gains temporarily to claim tax exemptions when immediate reinvestment is not possible.
Why are taxpayers facing issues with CGAS during ITR filing?
Because CGAS is manual, bank-dependent, and not integrated with the income tax e-filing system, leading to reporting errors and mismatches.
What changes are experts expecting in Budget 2026 for CGAS?
Experts expect online account opening, integration with the e-filing portal, wider bank access, and simplified ITR reporting.
Does CGAS data auto-populate in ITR forms?
No. Currently, CGAS deposits and withdrawals must be manually reported in ITR forms.
How can taxpayers avoid CGAS-related notices?
By maintaining accurate records, reconciling disclosures carefully, and seeking professional review before filing.
Final Takeaway
The Capital Gains Account Scheme remains essential for capital gains tax planning, but its outdated processes are causing significant hardship for ITR filers.
With Budget 2026 approaching, expert-backed reforms offer hope for a more transparent, digital, and taxpayer-friendly CGAS framework.
