Section 54 — Save LTCG Tax on Sale of Your House

The residential house you sell must be a long-term capital asset — held for more than 24 months from the date of acquisition. If held for 24 months or less the gain is short-term and Section 54 is not available.

Only individuals and Hindu Undivided Families (HUFs). Companies, LLPs and partnership firms cannot claim Section 54. The exemption is for the seller who reinvests the gain in a residential house in their own name.

The Income-tax Act, 2025 (effective from AY 2026-27) renumbers many sections but retains the same conditions for the residential-house capital-gains exemption. Returns, tax software and case law still refer to it as Section 54, so that remains the reference to use.

You must purchase the new residential house within 1 year before or 2 years after the date of transfer (sale) of the original house. Buying within one year prior to the sale also qualifies.

Construction of the new house must be completed within 3 years from the date of sale of the original property. Merely starting construction is not enough — completion within 3 years is required. Keep the completion certificate, electricity connection and possession proof.

If you cannot reinvest the capital gain in a new house before your ITR due date, deposit the unused gain amount in a CGAS account with a nationalised bank on or before the due date under Section 139(1). This preserves the Section 54 exemption. Use Form A to open and Form B to withdraw. Any amount not used within 2 years (purchase) or 3 years (construction) becomes taxable in the year the limit expires.

On or before the ITR due date under Section 139(1) for the year of sale — usually 31 July 2026 for individuals not requiring audit. The belated/revised-return date does not extend the CGAS deposit deadline.

Yes, but only once in your lifetime and only if the long-term capital gain is Rs 2 crore or less. If the LTCG exceeds Rs 2 crore you can claim exemption for only one new house. Once you use the two-house option, you cannot use it again in any future sale.

Yes. From AY 2024-25, the cost of the new residential house considered for the exemption is capped at Rs 10 crore. Any cost above Rs 10 crore is ignored, so the gain attributable to the excess remains taxable at 12.5%.

For sales on or after 23 July 2024, LTCG on land or building is taxed at 12.5% without indexation. For property acquired before 23 July 2024, a resident individual/HUF may instead opt for 20% with indexation if that gives lower tax. Section 54 can exempt the gain under either method.

If you sell the new house within 3 years of its purchase or construction, the Section 54 exemption is reversed. For computing capital gains on the new house, its cost of acquisition is reduced by the exemption earlier claimed, which increases the taxable gain on that later sale.

Yes. An NRI can claim Section 54 by reinvesting the gain in a new residential house in India. The buyer generally deducts TDS under Section 195 on the sale, so the NRI files an ITR to claim the exemption and any refund of excess TDS. CGAS can be used to park unused gains before the due date.

Section 54 applies when you sell a residential house and reinvest the capital gain in another house. Section 54F applies when you sell any other long-term asset (shares, plot, gold, commercial property) and reinvest the entire net sale proceeds in a residential house; the exemption is proportionate and you must not own more than one other house. Both share the Rs 10 crore new-house cap.

Yes. You can reinvest part of the gain in a new house under Section 54 and invest the balance (up to Rs 50 lakh) in NHAI/REC bonds under Section 54EC within 6 months of sale, combining both to fully exempt the gain.