Section 82 of the Income-tax Act, 2025 exempts long-term capital gains on a residential house where a new house is purchased within one year before or two years after, or constructed within three years. Where gains are up to ₹2 crore, two houses may be bought once in a lifetime, subject to a ₹10 crore ceiling.
What section 82 does
Section 82 is the exemption every homeowner asks about — the successor to section 54 of the Income-tax Act, 1961. It applies to an individual or Hindu undivided family with long-term capital gains from a residential house whose income is chargeable under the house property head.
The reinvestment window is the familiar one: purchase one year before or two years after the transfer, or construct within three years after it. Where the gains exceed the cost of the new house, only the excess is taxed.
Two ceilings are worth committing to memory. The two-house option in sub-section (5) is available only where capital gains do not exceed ₹2 crore, and sub-section (6) makes it a once-in-a-lifetime choice. Separately, sub-sections (7) and (8) cap both the cost of the new asset and the capital gains at ₹10 crore.
The Income-tax Act, 2025 takes effect from 1 April 2026 and applies from tax year 2026-27. The Income-tax Act, 1961 continues to govern every year up to 31 March 2026, including assessments, appeals and penalties for those years, because of the repeal and savings provision in section 536. Figures quoted here are the amounts written into the Act as enacted (with the Gazette corrigenda of 3 September 2025); the annual Finance Act can change rates and thresholds.
Old Act and new Act, side by side
The table below shows what the Income-tax Act, 1961 did and where the same ground is covered in the Income-tax Act, 2025.
| Income-tax Act, 1961 | What it did | Income-tax Act, 2025 |
|---|---|---|
| 54(1) | Exemption on reinvestment in a residential house | 82(1) |
| 54(2) | Capital Gains Account Scheme deposit | 82(2) and 82(4) |
| 54(1), proviso | Two houses where gains up to ₹2 crore, once in a lifetime | 82(5) and 82(6) |
| 54(1), fourth proviso | ₹10 crore cap on cost of new asset | 82(7) |
| 54(2), proviso | ₹10 crore cap on capital gains | 82(8) |
| 54F | Exemption where the asset sold is not a residential house | 86 |
Section 82 sub-section by sub-section
Read this alongside the bare text — each heading below is a sub-section of the section as enacted.
Sub-section (1) — who qualifies and what the relief is
An individual or HUF with long-term capital gains from a residential house (the original asset) who purchases one residential house in India within one year before or two years after the transfer, or constructs one within three years after it (the new asset), gets relief. If the gains exceed the cost of the new asset, the excess is charged under section 67 and the new asset's cost is treated as nil for a sale within three years. If the gains are equal to or less than the cost, nothing is charged and the new asset's cost is reduced by the capital gains for a sale within three years.
Sub-section (2) — the Capital Gains Account Scheme deposit
If the gains are not used to purchase the new asset within one year before the transfer, or not utilised before filing the return under section 263, the unutilised amount must be deposited in a specified bank or institution under the notified scheme. The deposit must be made before filing the return and not later than the due date under section 263(1), and proof of deposit must be submitted with the return.
Sub-section (3) — what counts as the cost of the new asset
The amount already utilised for purchase or construction, together with the deposited amount, is deemed to be the cost of the new asset — subject to the ₹10 crore ceiling in sub-section (7).
Sub-section (4) — what happens if the deposit is not used
If the deposited amount is not fully utilised within the period in sub-section (1), the unutilised amount is charged under section 67 as income of the tax year in which the three-year period from the date of transfer expires, and the assessee may withdraw it under the scheme.
Sub-sections (5) and (6) — the two-house option, once only
Where the capital gains do not exceed ₹2 crore, the assessee may at his option purchase or construct two residential houses in India, and 'one residential house' is then read as 'two'. Sub-section (6) is emphatic: once the option is exercised in any tax year, the assessee shall not be entitled to exercise it for the same or any other tax year. It is a once-in-a-lifetime election.
Sub-sections (7) and (8) — the ₹10 crore ceilings
If the cost of the new asset exceeds ₹10 crore, the excess is not taken into account for sub-section (1). And if the capital gains on the original asset exceed ₹10 crore, the excess is not taken into account for sub-section (2). High-value reinvestment therefore cannot shelter unlimited gains.
Worked example
An individual sells a long-held residential house in tax year 2026-27.
| Step | Working | Amount |
|---|---|---|
| Long-term capital gains under section 72 | After indexed cost | ₹1,80,00,000 |
| New house purchased in December 2026 | Within the two-year window | ₹1,30,00,000 |
| Unutilised gains deposited in the CGAS before the section 263(1) due date | Section 82(2) | ₹50,00,000 |
| Deemed cost of the new asset | ₹1,30,00,000 + ₹50,00,000 — section 82(3) | ₹1,80,00,000 |
| Capital gains charged in 2026-27 | Gains do not exceed the deemed cost | Nil |
Because the gains of ₹1,80,00,000 are below ₹2 crore, this taxpayer could instead have bought two houses under sub-section (5) — but doing so would burn the once-in-a-lifetime option in sub-section (6) forever.
Now suppose only ₹30,00,000 of the ₹50,00,000 deposit is actually used for construction within three years. Under sub-section (4), the unused ₹20,00,000 is charged under section 67 in the tax year in which the three-year period from the date of transfer expires — not in the year of the original sale.
Compliance checklist and due dates
- Diarise all three windows: one year before, two years after for purchase, and three years after for construction.
- Deposit unutilised gains in the Capital Gains Account Scheme before filing the return and by the section 263(1) due date, and attach proof.
- Before exercising the two-house option, remember sub-section (6) — it can never be used again.
- Check the ₹2 crore gains ceiling for the two-house option and the ₹10 crore ceilings in sub-sections (7) and (8).
- Do not sell the new house within three years; the cost is nil or reduced under sub-section (1), which inflates the later gain.
- Track the three-year expiry date for any CGAS balance — the charge under sub-section (4) falls in that year.
Common mistakes
- Depositing in the CGAS after the section 263(1) due date. Sub-section (2)(b) sets that as the outer limit.
- Exercising the two-house option casually. It is available once in a lifetime under sub-section (6).
- Assuming the two-house option is available where gains exceed ₹2 crore.
- Selling the new house within three years and forgetting that its cost is nil or reduced.
- Overlooking the ₹10 crore ceilings, which apply to both the new asset's cost and the capital gains.
- Confusing section 82 with section 86 — section 82 applies where the asset sold is a residential house.
This is an explanatory guide, not tax advice, and it does not reproduce the section in full. Read the bare text of the section before you rely on it, and check for later amendments, the Income-tax Rules made under the new Act, and CBDT circulars and notifications.