CGAS deposit should be on actual sale consideration received from the property instead of stamp duty, Why Budget 2026 must fix this

Section 54F of the Income Tax Act, 1961 allows individual and HUF taxpayers to save tax on long term capital gains (LTCG) coming from the sale of a long-term capital asset, other than a residential property, by investing the capital gains in a new residential property. However, if you can't satisfy the conditions of Section 54F then you can deposit the capital gains in an special bank account called Capital Gain Account Scheme (CGAS).

Here are the conditions to qualify for Section 54 LTCG tax exemption:

• Such new house property should be purchased within a period of 1 year before or 2 years after the date of transfer of old house or should be constructed within a period of 3 years from the date of transfer of the old house.
• You should not transfer the newly acquired asset for a period of 3 years from the date of acquisition or construction. In case of any such transfer or conversion made, the exempted gains would be subjected to tax in the year of such transfer or conversion.
• You should not own more than one residential house property on the date of transfer of capital asset
• During the period of 2/3 Years, you must not purchase/construct any other House Property

Chartered Accountant Suresh Surana explains how the Capital Gains Tax Exemption is calculated under Section 54F: Capital Gains x Investment in New Residential Property/Net Sale Consideration


Surana says: “Net Sale Consideration is the amount received from the sale of the capital asset after deducting any expenses related to the sale.”

Proportional Exemption:

• If the entire capital gains are reinvested in the new property, the taxpayer can claim full exemption on the capital gains tax amount.
• If only a part of the gains is invested, only the proportionate amount of such long term capital gains will be exempted from taxation.

Also read: ITR filers face several issues with Capital Gains Account Scheme - experts suggest fixes in Budget 2026

What is the issue with the Capital Gain Account Scheme (CGAS) that Budget 2026 should fix?

Taxmann research says that Section 86 of the new Income Tax Act 2025 [Corresponds to Section 54F of the Income Tax Act 1961] of the Income Tax Act allows tax exemption to an Individual and HUF from the long-term capital gains arising from transfer of a capital asset other than a residential house property.

The tax exemption is allowed if the amount of net consideration is invested in a new house property within the prescribed time limit. If the net consideration is not invested by the due date of filing the income-tax return, then the assessee is required to deposit the amount in the Capital Gain Account Scheme (CGAS).

‘Net Consideration’ is the full value of the consideration received or accruing from the transfer of the capital asset, as reduced by any expenditure incurred wholly and exclusively in connection with such transfer.

Taxmann research highlights that this calculation ignores a few situations where the net consideration to be invested will fall short of the money available in hand, such as:

• Where the stamp duty value is higher than the full sales consideration;
• Deduction of tax at source (TDS) by the purchaser while remitting sales consideration; and
• Receipt of sale consideration in installments.

In all the situations mentioned above, the amount received by the person is less than the sales consideration used for the computation of capital gains.

Taxmann research says: “Thus, there would be a shortfall in the amount required to be invested in the capital gain account scheme to claim the Section 86 exemption.”

Thus the income tax Assessing Officer often challenges the Section 86 exemption by concluding that the assessee was required to deposit sales consideration, which was taken into consideration for computing capital gains.

Budget 2026 recommendation from Taxmann research: “It is recommended that the Government revisit the definition of ‘net consideration’ to bring clarity under the law so as to avoid any litigation.”