How to Close a Capital Gains Account (CGAS): Form G, AO Approval & Full Procedure

We get this question a lot in Saket and across Delhi NCR: "I sold a property, parked the gain in a capital gains account, and now I've bought the new house — how do I get my money out and close the account?" Most people expect to walk into the bank, sign a form and collect the balance. That is not how it works. The one fact that surprises almost everyone is that the bank cannot close the account without your Assessing Officer's approval on Form G. Get that wrong — or close late with tax unpaid — and the closure becomes the moment your exemption unravels.

First, what a CGAS account actually is

The Capital Gains Accounts Scheme (CGAS), 1988 lets you preserve a capital-gains exemption when you cannot reinvest the gain before your income-tax return due date. You deposit the amount in an authorised bank and it buys you time to purchase or construct the new asset. It is used to hold exemptions under Sections 54, 54B, 54D, 54F, 54G, 54GA and 54GB of the Income-tax Act, 1961. Two account types exist:

• Account-A — a savings-type account with a passbook, for money you may need to draw down in stages (e.g. construction).
• Account-B — a term-deposit-type account with a deposit receipt, for money you'll use in one go (e.g. an outright purchase).

Note on the new law: the Income-tax Act, 2025 came into force on 1 April 2026 and renumbers these provisions, but the scheme and its closure procedure are unchanged. For AY 2026-27 and earlier assessment years, the 1961-Act section numbers still apply. See our guide on the old vs new section numbers for the mapping.

The one rule everyone gets wrong: AO approval is mandatory

The closure mechanism sits in the scheme itself. To close either account type, the depositor must file Form G with the passbook (Account-A) or deposit receipt (Account-B) at the deposit office, with the prior approval of the Assessing Officer who has jurisdiction over the depositor. The bank is only the deposit office; the gatekeeper is the AO.

Why does the Income-tax Department insert itself into a bank closure? Because the CGAS account is the parking spot for a deferred tax. At closure, the Department wants to confirm one of two things: either the money was genuinely used for the new house (so the exemption holds), or it wasn't fully used (so the unutilised part is now taxable and the tax has been paid). The AO's endorsement on Form G is that confirmation. In practice, banks may in some cases process closure on a self-declaration — but that convenience does not extinguish your liability, and the correct route remains the AO-endorsed Form G.

Before you close: figure out which situation you're in

The paperwork is the same; the tax outcome is not. Identify your case first:

The "specified period" is broadly two years for purchase and three years for construction from the date of transfer (the exact window depends on the section you claimed under). Where the deposit is unutilised, the law treats it as a deemed long-term capital gain of the previous year in which that time limit expires — that is the moment the deferred tax comes due, whether or not you have closed the account yet.

Step-by-step: closing a CGAS account (Form G route)

Step 1 — Confirm the time position and utilisation

Pin down two dates: the date of transfer of the original asset, and the end of your purchase/construction window. Then total what you actually spent from the account on the new house against what was deposited. This tells you whether anything is taxable. Don't guess — the numbers here decide your tax, and they're the first thing the AO will check.

Step 2 — Compute and pay tax on any unutilised amount

If any part of the deposit is unutilised after the time limit, compute the deemed long-term capital gain and pay the tax (self-assessment tax) before you approach the AO for closure. Walking into the AO's office with the tax already paid is what turns a slow approval into a fast one. Our capital gains calculator helps you sanity-check the number, and our tax advisory team can compute it precisely.

Step 3 — Fill in Form G

Complete Form G with the account details and the passbook number (Account-A) or deposit-receipt number (Account-B). State the capacity in which you sign — individual, guardian of a minor, Karta of an HUF, or authorised officer of a firm/company — and strike out the options that don't apply. Leave the AO-approval block for the officer to sign and stamp.

Step 4 — Get prior approval of the jurisdictional Assessing Officer

This is the pivotal step. Submit Form G to your AO with the supporting file (see the checklist below). The AO verifies the sale of the original asset, the utilisation of the deposit for the new house, and the tax paid on any unutilised amount. Once satisfied, the AO signs and stamps the approval on Form G. Keep a copy of the endorsed form.

Step 5 — Submit the endorsed Form G to the bank (deposit office)

Take the AO-endorsed Form G, together with the original passbook or deposit receipt, to the branch where the account is held. For an eligible company under Section 54GB, a joint application is required. The bank verifies the endorsement and processes the closure.

Step 6 — Receive the balance and get a closure confirmation

The deposit office pays out the entire balance including accrued interest by crediting it to your bank account. Ask for a closure acknowledgment or statement — keep it with your records; it is useful if the utilisation is ever questioned in assessment. Finally, make sure the closure and the tax on any unutilised amount are correctly reflected in the relevant year's income-tax return.

Documents to carry for the AO and the bank

• Duly filled Form G (Form H for a nominee/legal heir).
• Original Account-A passbook or Account-B deposit receipt.
• PAN and identity/address proof of the depositor.
• Proof of the original sale (sale deed of the asset transferred) and the capital-gains computation.
• Proof of utilisation — sale/purchase deed of the new house, builder receipts, construction bills, bank statements showing withdrawals used for the property.
• Challan for tax paid on any unutilised amount (self-assessment tax), where applicable.
• The ITR and computation for the year the exemption was originally claimed.

The single biggest cause of delay is a utilisation trail that doesn't reconcile with the withdrawals from the account. If your bank statements, builder receipts and ITR tell a consistent story, the AO's job is easy.

Closing the account of a deceased depositor (Form H route)

When the depositor has died, the account is closed on Form H, again with the prior approval of the deceased's jurisdictional Assessing Officer:

• If a nomination exists: the nominee files Form H with the passbook/deposit receipt.
• If there is no nomination: the legal heir files Form H supported by a succession certificate or probate.
• If there are multiple legal heirs: the heir making the claim provides a letter of authorisation from the other heirs in his favour.

The deposit office then pays the balance, including interest, to the nominee/heir. Nominations themselves are made on Form E, and changed on Form F, during the depositor's lifetime — worth checking that a valid nomination is on record before it is ever needed.

The tax trap that catches people at closure

Two taxes sit inside a CGAS account, and they behave differently:

• Capital-gains tax on unutilised principal — triggered by the expiry of the time limit, not by closure. If you dawdle on closing the account, the tax is still due for the year the period ended. Closing the account does not create the liability; the passage of time does.
• Tax on interest — the interest credited each year is taxable as income from other sources, and the bank deducts TDS and issues a certificate. Report it annually, not just at the end.

Where people lose money is by assuming closure and tax are the same event. They aren't. You can owe the capital-gains tax a full year (or more) before you get around to closing the account — and interest under the Act keeps running on unpaid tax in the meantime.

Why closures actually get stuck

• No AO approval obtained — walking into the bank with an unendorsed Form G and being turned away.
• Utilisation trail doesn't reconcile — withdrawals that don't match the property payments.
• Tax on the unutilised amount not paid — the AO won't endorse until it is.
• Wrong form — using Form G for a deceased depositor's account instead of Form H, or missing the succession certificate.
• Lost passbook/deposit receipt — the original instrument is needed; a lost one means an indemnity/duplicate process first.

How Startup Advisory helps you close a CGAS account cleanly

Our CA-led team in Saket handles capital-gains account closures for clients across Delhi, Gurgaon, Noida, Ghaziabad and Faridabad:

• We compute the utilised vs unutilised position and the exact tax on any deemed capital gain — before you meet the AO.
• We prepare Form G / Form H and assemble a clean, reconciled documentation file.
• We represent you before the Assessing Officer so the approval isn't held up over avoidable queries.
• We make sure the closure and any tax are correctly reflected in your ITR, closing the loop with the Department.

Call 9311972982 or book a free consultation and we'll map out your specific closure — and tell you, upfront, whether any tax is due.

This article is general information, not tax or legal advice. The Capital Gains Accounts Scheme, 1988 and the Income-tax Act are amended from time to time and their application depends on your specific facts. Verify current requirements against primary sources (incometaxindia.gov.in, your bank's CGAS rules) or consult a professional before acting.