Capital Gains Account Scheme for RSU holders: how to defer tax while you find a property

Most RSU holders think of their capital gains as a straightforward taxable event. Sell shares, compute gain, pay tax. But if the shares were held for over 24 months — making the gain long-term — there is a legitimate path to defer or eliminate the 12.5% LTCG tax by using the proceeds to buy a residential property.

The mechanism that bridges the gap between selling shares and completing the property purchase is the Capital Gains Account Scheme (CGAS).

The underlying exemption: Section 54F

Section 54F of the Income Tax Act provides a full or partial exemption on LTCG arising from the transfer of any long-term capital asset (other than a residential house) — which includes foreign equity like US RSU shares — if the net sale consideration is invested in a new residential house in India.

Key conditions:

1. The asset sold must be a long-term capital asset (for US-listed shares: held > 24 months from vest date)
2. The new house must be purchased within 1 year before or 2 years after the date of sale — or constructed within 3 years after the sale
3. On the date of sale, you must not own more than one residential house (other than the new one being purchased)
4. You must not purchase another residential house within 2 years, or construct within 3 years, of the sale date (other than the one being bought with the proceeds)
5. The exemption is proportional if you invest less than the full net sale consideration

The exemption amount is computed as:

Exemption = LTCG × (Amount invested in new house ÷ Net sale consideration)

If you invest the entire net sale consideration, the entire LTCG is exempt.

Why the CGAS exists

The Section 54F window is generous — 2 years for purchase, 3 years for construction. But the ITR-2 filing deadline is July 31 of the assessment year. Most RSU holders who sold shares in FY 2025-26 won't have completed a property purchase by July 31, 2026.

Without CGAS, they'd face a dilemma: pay LTCG tax now (losing the exemption they intend to claim) or delay filing (losing the ITR deadline).

The Capital Gains Account Scheme solves this. You deposit the unutilised net sale consideration into a designated CGAS account at a scheduled bank before the ITR filing date, claim the exemption in your ITR-2, and then use the CGAS balance to pay for the property when the purchase closes.

How CGAS works step by step

Step 1: Sell your RSU shares (and compute the LTCG)

You sell US RSU shares that were vested more than 24 months ago. Compute:

• Net sale consideration = gross sale proceeds in INR (converted at SBI TTBR on sale date)
• Cost basis = FMV at vest date × shares × SBI TTBR on vest date
• LTCG = net sale consideration − cost basis

The LTCG is taxed at 12.5% (no indexation for foreign equity post-Budget 2024).

Step 2: Decide how much to reinvest

If you intend to buy a house with the full net sale consideration, the entire LTCG is exempt under Section 54F. If you plan to invest only part of it, the exemption is proportional.

Important: Section 54F uses net sale consideration (gross proceeds), not just the LTCG, as the reinvestment benchmark. You need to invest the full sale proceeds — not just the gain portion — to get the full exemption.

Example:

• RSU shares sold for ₹50 lakh (net sale consideration)
• Cost basis: ₹30 lakh
• LTCG: ₹20 lakh (taxable at 12.5% = ₹2.5 lakh without exemption)
• To exempt the full ₹20 lakh LTCG, you must invest the full ₹50 lakh in the new house (not just ₹20 lakh)

Step 3: Open a CGAS account before July 31

If you haven't completed the property purchase before the ITR filing date (July 31, 2026 for AY 2026-27), deposit the unutilised amount in a Capital Gains Account at any scheduled bank that offers the scheme.

Major banks that offer CGAS:

• State Bank of India
• HDFC Bank
• ICICI Bank
• Axis Bank
• Bank of Baroda
• Punjab National Bank
• Most other nationalised and private scheduled banks

You cannot open a CGAS account online — visit a branch with:

• PAN card
• ITR acknowledgement (or CA certificate confirming the capital gains)
• Address proof
• Details of the capital gain (asset type, sale date, amount)

The bank opens a CGAS Deposit Account in your name. There are two types:

• Type A (Savings account): Works like a savings account; you can withdraw in tranches as property payments are made
• Type B (Term deposit): Fixed deposit-style; suitable if the full amount won't be needed soon

Most property buyers use Type A (more flexible for milestone payments to developers).

The deposit must be made before July 31, 2026 — the original ITR due date, not the belated return deadline.

Step 4: Claim the exemption in ITR-2

In ITR-2 Schedule CG, when reporting the LTCG from the RSU share sale:

• Enter the full LTCG computed
• Enter the exemption claimed under Section 54F
• The system will ask for the amount deposited in CGAS and the bank details (account number, BSR code)
• The net taxable LTCG (after 54F exemption) flows into the total income computation

If the full amount was deposited in CGAS and you intend to invest all of it, the taxable LTCG is nil.

Step 5: Use CGAS funds to pay for the property

When property payments fall due, withdraw from the CGAS account. The bank requires:

• A letter from you requesting withdrawal
• Details of the purpose (property purchase — address, seller name, amount)
• For large withdrawals, some banks require a CA certificate

Withdrawals must be used for the property purchase only. If you withdraw and don't use the funds for property, the unutilised portion loses the exemption.

Step 6: Time limits for completion

If the property isn't purchased/constructed within these limits, the CGAS balance on the expiry date is treated as LTCG and taxed in that year.

The 24-month holding period: RSU-specific calculation

The 24-month clock for US-listed RSU shares starts on the vest date — the date shares are released to your broker account, not the grant date and not the date your sell-to-cover is processed.

Example:

• Grant date: July 2022
• Vest date (shares released): August 1, 2023
• 24-month threshold: August 1, 2025
• Sale date: September 15, 2025 → LTCG (held > 24 months from vest)
• Sale date: July 15, 2025 → STCG (held < 24 months from vest — CGAS not available)

If you sold multiple lots vested at different times, each lot is tested independently. Lots held over 24 months generate LTCG eligible for Section 54F; lots held under 24 months generate STCG that is not eligible.

Section 54EC: the bond alternative (no CGAS needed)

If buying a house isn't the plan but you still want LTCG exemption, Section 54EC allows you to invest up to ₹50 lakh in specified bonds (currently NHAI and REC bonds) within 6 months of the asset sale.

For large RSU LTCG above ₹50 lakh, Section 54EC covers only a portion. Section 54F (with CGAS) has no such cap.

What RSU holders commonly get wrong

Depositing after July 31

The CGAS deposit must be made before the original ITR due date (July 31). Filing a belated return and then depositing in CGAS before December 31 does not work — the exemption is not available for a belated CGAS deposit. The July 31 deadline is non-negotiable.

Using LTCG amount instead of net sale consideration

Section 54F requires reinvestment of the net sale consideration (gross proceeds), not just the capital gain. RSU holders sometimes deposit only the gain amount in CGAS and wonder why the exemption is proportional. If your sale proceeds were ₹50 lakh and cost basis ₹30 lakh, you need to invest ₹50 lakh — not ₹20 lakh — for full exemption.

Owning a second house

Section 54F has an eligibility condition: you must not own more than one residential house on the date of sale (other than the new one being purchased). If you already own two houses, you cannot claim Section 54F on RSU LTCG. Verify your ownership position before planning around this exemption.

STCG from short-tenure lots

If RSU shares were held less than 24 months, the gain is STCG taxed at your slab rate. Section 54F and CGAS are not available for STCG. Only LTCG is eligible.

Not using CGAS funds for the property

CGAS withdrawals must go toward the property purchase. Withdrawing and using the funds for anything else — even temporarily — risks the entire exemption. The bank records the purpose of withdrawal; the ITD can verify this during assessment.

Quick summary

The CGAS is a planning tool, not a tax escape route. It works when you genuinely intend to buy a house with the RSU proceeds and need the ITR filing deadline to precede the property closing. If you have no property purchase planned, the LTCG is taxable at 12.5% and CGAS is not the right instrument.

Does LTCG from US stocks qualify for Section 54F?

Yes. Section 54F uses the phrase "any long-term capital asset other than a residential house." US-listed RSU shares held for more than 24 months are a long-term capital asset under Section 2(29A) read with Section 2(42A) of the Income Tax Act. They are not a residential house. They therefore qualify as the "asset transferred" for Section 54F purposes.

There is no restriction in Section 54F limiting eligibility to Indian-listed securities or domestic assets. Foreign equity - US RSU shares, Nasdaq-listed ETFs, or any other foreign securities held 24 months or more - qualifies. Many CAs are not aware that Section 54F applies to foreign equity LTCG. Raise it explicitly if your CA has not flagged it.

Worked example: Rs 30 lakh LTCG from RSU shares to CGAS to full exemption

Facts: Sold accumulated Apple and Microsoft RSU shares vested 2020-2022 (held 3+ years). Sale date February 2026.

With Section 54F and CGAS:

Property purchase not yet completed by July 31, 2026. You deposit Rs 80 lakh in CGAS before July 31, 2026.

Section 54F exemption = LTCG x (Amount invested / Net sale consideration) = Rs 30L x (Rs 80L / Rs 80L) = Rs 30 lakh (100% exempt)

Tax payable on LTCG: Rs 0. Tax saved: Rs 3.75 lakh.

Conditions this example requires: property purchase completes within 2 years of February 2026 (by February 2028); you do not own more than one residential house as of February 2026; you do not sell the new house within 3 years of purchase; CGAS withdrawals go to property payments only.

Partial investment: proportional exemption

If you invest only part of the net sale consideration:

Exemption = LTCG x (Amount invested / Net sale consideration)

Example: Net sale consideration Rs 80 lakh, LTCG Rs 30 lakh, but you invest only Rs 60 lakh in the house:

Exemption = Rs 30L x (Rs 60L / Rs 80L) = Rs 22.5 lakh. Taxable LTCG = Rs 7.5 lakh. Tax = Rs 93,750.

Conditions checklist for RSU holders

STCG lots (held less than 24 months) do not qualify for Section 54F regardless of property reinvestment. Only LTCG-eligible lots benefit from the exemption.