Section 54 — Save LTCG Tax
on Sale of Your House
Exempt long-term capital gains from selling a residential house by reinvesting in a new house. Time limits, CGAS, the 2-house option, the Rs 10 crore cap and NRI rules for FY 2025-26.
Section 54 exempts the long-term capital gain on selling a residential house (held over 24 months) if you reinvest the gain in another residential house in India — buy it 1 year before or 2 years after the sale, or complete construction within 3 years. Unused gain must go into a Capital Gains Account Scheme (CGAS) before your ITR due date. You may buy two houses once in a lifetime if the LTCG is Rs 2 crore or less. Since AY 2024-25 the new-house cost counted for exemption is capped at Rs 10 crore. LTCG on the house is otherwise taxed at 12.5% without indexation (sales on/after 23 Jul 2024).
Section 54 — Key Conditions at a Glance
Section 54 is available only to an individual or HUF (not companies or firms). The asset sold must be a long-term residential house and the new asset must be a residential house in India.
| Parameter | Requirement |
|---|---|
| Who can claim | Individual / HUF only |
| Asset sold | Residential house property (house, flat, portion used as residence) |
| Holding period | More than 24 months (long-term) |
| New asset | One residential house in India (two if LTCG ≤ Rs 2cr, once in a lifetime) |
| Purchase time limit | 1 year before OR 2 years after date of transfer |
| Construction time limit | 3 years from date of transfer (must be completed) |
| Exemption cap | Cost of new house counted only up to Rs 10 crore (AY 2024-25 onwards) |
| CGAS deposit deadline | On or before ITR due date u/s 139(1) of the sale year |
| Lock-in on new house | Do not sell within 3 years of purchase / construction |
The Income-tax Act, 2025 (effective AY 2026-27) renumbers these provisions but keeps the same conditions; the familiar "Section 54" remains the reference used in returns and case law.
If your LTCG (or the cost of the new house) exceeds Rs 10 crore, only Rs 10 crore of the new-house cost is counted for exemption — the balance gain is taxed at 12.5%. High-value transactions should plan reinvestment and possibly combine Section 54EC bonds.
Section 54 vs 54F vs 54EC
Choose the right exemption based on the asset you sold and where you can reinvest. See our detailed pages on Section 54F and Section 54EC.
| Section | Asset sold | Reinvest in | Time limit | Max exemption |
|---|---|---|---|---|
| 54 | Residential house (LTCG) | Residential house | Buy 2yr / build 3yr | Full LTCG (1 or 2 houses) |
| 54F | Any LTCA other than a house | Residential house | Buy 2yr / build 3yr | Proportionate (net sale proceeds) |
| 54EC | Land or building (LTCG) | NHAI / REC bonds | Within 6 months | Rs 50 lakh |
54 and 54F cannot both be claimed for the same asset. 54EC can be combined with 54 or 54F for partial exemption. Both 54 and 54F carry the Rs 10 crore new-house cap.
Section 54 — house for house
- You sold a residential house
- Reinvest only the capital gain
- Full exemption if gain ≤ new-house cost
- Two houses allowed once if LTCG ≤ Rs 2cr
Section 54F — other asset for house
- You sold shares, plot, gold, etc.
- Reinvest the net sale consideration
- You must not own more than one other house
- Exemption is proportionate to amount reinvested
Not sure whether Section 54 or 54F applies to your sale? Get it reviewed before you file.
Talk to a Tax Expert →Capital Gains Account Scheme (CGAS)
If you cannot buy or begin building the new house before your ITR due date, deposit the unused capital gain (not the full sale proceeds) in a CGAS account with a nationalised bank before the due date u/s 139(1) — usually 31 July 2026 for FY 2025-26. This preserves the exemption while you complete the reinvestment.
| CGAS detail | Rule |
|---|---|
| Who can open | Individual / HUF claiming Section 54 or 54F |
| Where | Any nationalised / authorised bank (SBI, PNB, BoB, Canara, etc.) |
| Form to open | Form A |
| Form to withdraw | Form B / Form C (unutilised amount) |
| Account types | Type A (savings) or Type B (term deposit) |
| Deposit deadline | On or before ITR due date of the sale year (not the belated-return date) |
| Use the money by | 2 years (purchase) or 3 years (construction) from the original sale |
| If unused at deadline | Unspent CGAS balance taxed as LTCG in the year the limit expires |
Amounts withdrawn from CGAS should be used for the house (commonly within 60 days of withdrawal). See our CGAS guide for the step-by-step process.
Section 54 in Numbers
A house bought long ago is sold in FY 2025-26 with an LTCG of Rs 80 lakh. Two outcomes depending on how much is reinvested in a new house:
Full reinvestment — nil tax
Partial reinvestment
For land/building acquired before 23 July 2024, resident individuals and HUFs may compute LTCG under the old 20% with indexation or the new 12.5% without indexation, whichever tax is lower. The Section 54 exemption applies to the gain either way — pick the method that leaves less taxable gain.
Section 54 — Frequently Asked Questions
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Sold a house? Save the LTCG legally under Section 54
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