India's Capital Gains Accounts Scheme Goes Digital: Consequences Of The 2025 Amendment For Taxpayers

On November 19, 2025, the Ministry of Finance announced the Capital Gains Accounts (Second Amendment) Scheme, 2025, marking a vital step towards the modernization of the Capital Gains Accounts Scheme, 1988 (CGAS). This amendment demonstrates the Government of India's ongoing commitment to reform outdated tax compliance systems to better integrate with the nation's swiftly advancing digital financial landscape, while also improving procedural efficiency, transparency, and the overall convenience for taxpayers.

I. What Is the Capital Gains Accounts Scheme?

According to the Income-tax Act of 1961, taxpayers who wish to benefit from exemptions on long-term capital gains tax through provisions like Sections 54, 54F, 54EC, 54GB, and the recently added Section 54GA must reinvest the relevant sale proceeds into designated assets within specified statutory deadlines. If such reinvestment cannot be finalized before the deadline for filing the income-tax return, the unused portion of the capital gains may be deposited into a Capital Gains Account held with an authorized bank, thereby ensuring the availability of the exemption.

Traditionally, the operation of the Capital Gains Accounts Scheme has been marked by manual, paperwork-heavy processes, usually requiring physical application forms and deposits made via cheques or demand drafts, leading to administrative inefficiencies and a lack of procedural flexibility.

II. Key Changes Introduced in 2025

1. Formal Acknowledgment of Digital Payment Methods

Among the most significant reforms brought forth by the 2025 amendment is the formal acknowledgment of electronic methods for both deposits into and withdrawals from Capital Gains Accounts. The amendment explicitly allows the utilization of the following digital payment channels: Credit and debit cards, Net banking services, Immediate Payment Service (IMPS), Unified Payments Interface (UPI), Real Time Gross Settlement (RTGS), National Electronic Funds Transfer (NEFT), and BHIM Aadhaar Pay.

This signifies a clear shift away from the Scheme's historical dependence on physical instruments such as cheques and demand drafts, aligning the CGAS framework with the modern digital payment infrastructure in India. Notably, in determining eligibility for capital gains tax exemption, the date of deposit will now be associated with the date on which the electronic payment is actually received by the authorized bank, thus providing enhanced certainty and procedural transparency.

2. Extension of CGAS Coverage to Section 54GA

The amendment made in 2025 specifically expands the reach of the Capital Gains Accounts Scheme to encompass Section 54GA of the Income-tax Act, 1961, which outlines the exemptions related to capital gains that arise from the transfer of assets when an industrial undertaking moves from an urban area to a Special Economic Zone (SEZ). By incorporating transactions under Section 54GA into the CGAS framework, this amendment significantly extends the Scheme's applicability and increases its importance for industrial firms and business entities engaged in relocation and restructuring activities.

3. Expansion of the Network of Authorised Deposit Offices

Previously, the operation of Capital Gains Accounts was limited to a select group of specifically designated banking institutions. However, the 2025 amendment significantly relaxes this restriction by allowing all branches of the State Bank of India and its affiliate banks, as well as any "banking company" as defined by the Banking Regulation Act of 1949, to operate as deposit offices, contingent upon authorization from the Central Government. This expansion greatly improves the geographical coverage and accessibility of the Capital Gains Accounts Scheme, thus promoting enhanced compliance ease for taxpayers across different jurisdictions.

4. Electronic Records in Place of Conventional Passbooks

The revised scheme eliminates the requirement for the compulsory issuance and upkeep of physical passbooks. Instead, authorized banks are permitted to provide electronic account statements, which will serve as valid and acceptable documentation for all purposes under the Capital Gains Accounts Scheme. This change notably streamlines procedural requirements, improves record-keeping efficiency, and allows for more effective verification and auditing by tax authorities, while also bringing the Scheme in line with modern digital banking standards.

5. Online Closure of Capital Gains Accounts Commencing April 2027

An important procedural improvement brought forth by the amendment is the option for the digital closure of Capital Gains Accounts. Starting from 1 April 2027, account holders will have the ability to request the closure of CGAS accounts electronically, authenticated either by a Digital Signature Certificate (DSC) or an Electronic Verification Code (EVC). The comprehensive operational framework and safeguards regulating such electronic closures will be outlined in procedural guidelines to be issued by the Directorate General of Income Tax, thereby ensuring a secure, consistent, and standardized digital process.

III. Practical Implications for Taxpayers and Businesses

1. Improved Convenience and Compliance Efficiency

The implementation of digital solutions for deposits, withdrawals, and account statements significantly simplifies procedural complexities and diminishes dependence on traditional banking methods. This transformation alleviates administrative strains, accelerates compliance procedures, and enhances accessibility for taxpayers. The changes are especially beneficial for individuals and businesses that gain capital from the transfer of property or other assets and need extra time to complete qualifying reinvestments while maintaining their eligibility for statutory tax exemptions.

2. Enhanced Flexibility for Corporate Taxpayers

For corporations involved in restructurings, relocations, or significant asset transactions, the digitization of the Capital Gains Accounts Scheme brings increased predictability and operational flexibility in managing reinvestment timelines, cash flows, and compliance with statutory obligations. By diminishing reliance on manual documentation and in-person branch procedures, the updated framework alleviates delays that were historically linked to procedural bottlenecks and restricted banking access.

3. Enhanced Flexibility for Corporate Taxpayers

For corporations involved in restructurings, relocations, or significant asset transactions, the digitization of the Capital Gains Accounts Scheme brings increased predictability and operational flexibility in managing reinvestment timelines, cash flows, and compliance with statutory obligations. By diminishing reliance on manual documentation and in-person branch procedures, the updated framework alleviates delays that were historically linked to procedural bottlenecks and restricted banking access.

4. The Ongoing Significance of Documentation and Prompt Compliance

Despite the shift towards a digital framework, unwavering compliance with statutory deadlines remains crucial. Taxpayers must guarantee that any unutilized capital gains are credited into a Capital Gains Accounts Scheme account by the filing deadline for the income tax return if reinvestment is not finalized. Diligent record-keeping remains vital for validating compliance and ensuring efficient verification and audit processes.

IV. Conclusion

The Capital Gains Accounts (Second Amendment) Scheme, 2025 marks a pivotal advancement in the modernization of an established tax compliance system. By officially incorporating electronic payment options, digital account statements, and online account closure procedures, the Government has effectively aligned the Capital Gains Accounts Scheme with India's rapidly advancing digital financial landscape. These changes are anticipated to improve procedural efficiency, transparency, and the ease of compliance for both individual taxpayers and corporate entities, especially in scenarios involving significant capital gains and time-sensitive reinvestment requirements.

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