When you sell a house, plot, commercial property, agricultural land, jewellery, shares, or another capital asset at a profit, you may have to pay capital gains tax. However, the income tax law allows taxpayers to reduce or even save this tax by reinvesting the capital gain or sale proceeds in specified assets. Therefore, proper tax planning before selling the original asset can make a significant difference.
Moreover, the Income-tax Act, 2025 came into effect from 1 April 2026 and replaced the Income-tax Act, 1961. Nevertheless, the earlier law may continue to apply to transactions and proceedings relating to previous tax years under the relevant transition provisions.
This article explains the major capital gain exemptions in simple language. In addition, it will help taxpayers who buy or sell properties in Greater Noida, Noida, Delhi-NCR, and other parts of India.
Understanding Capital Gains
A capital gain arises when you sell a capital asset for more than its tax-adjusted cost. Capital assets may include:
- A residential house
- A residential or commercial plot
- Commercial property
- Agricultural land
- Shares and securities
- Gold and jewellery
- Certain business assets
- Other investments
The law classifies capital gains as short-term or long-term depending on the type of asset and the period for which you held it. Generally, most exemptions discussed in this article apply only to long-term capital gains. Therefore, before planning any exemption, you must first determine whether the gain is short-term or long-term.
Why the Type of Asset Matters
The exemption mainly depends on two factors:
- The type of asset you sold
- The asset in which you reinvested the money
For example, if you sell a long-term residential house and purchase another residential house, Section 54 may apply. On the other hand, if you sell a long-term plot and purchase a residential house, Section 54F may apply, subject to its conditions.
Thus, purchasing a new property alone does not guarantee an exemption. Instead, you must match the original asset, the new investment, and the relevant legal provision.
Key Provisions and Exemption Matrix
| Provision | Asset sold | New asset or investment | Eligible taxpayer | Investment period | Main conditions |
|---|---|---|---|---|---|
| Section 54 | Long-term residential house property | One residential house in India or, in certain cases, two houses | Individual or HUF | Purchase within 1 year before or 2 years after the transfer; construction within 3 years | Exemption is limited to the lower of capital gain or eligible investment. The law caps the eligible investment at ₹10 crore. A taxpayer may purchase two houses once in a lifetime if LTCG does not exceed ₹2 crore. |
| Section 54F | Any long-term capital asset other than a residential house | One residential house in India | Individual or HUF | Purchase within 1 year before or 2 years after the transfer; construction within 3 years | Full exemption requires investment of the entire net consideration. The taxpayer must satisfy the house-ownership conditions. The law caps the net consideration at ₹10 crore. |
| Section 54EC | Long-term land, building, or both | Specified capital gain bonds | Any taxpayer | Within 6 months from the date of transfer | Maximum eligible investment is ₹50 lakh. The bonds generally carry a five-year lock-in period. |
| Section 54B | Agricultural land used for agricultural purposes | Another agricultural land | Individual or HUF | Within 2 years from the date of transfer | The old land must satisfy the agricultural-use condition. The taxpayer should not sell the new land within 3 years. |
| Section 54D | Industrial land or building acquired compulsorily | Land or building for an industrial undertaking | Any taxpayer | Within 3 years after receiving compensation | The taxpayer must have used the original asset for industrial purposes for the prescribed period. |
| Section 54EE | Any long-term capital asset | Units of a notified fund | Any taxpayer | Within 6 months from the transfer | The investment remains subject to the prescribed limit, notification, and lock-in conditions. |
| Section 54GB | Eligible residential property | Equity shares of an eligible company or start-up | Individual or HUF | Before the prescribed return-filing deadline | The company must use the funds to purchase eligible business assets. The taxpayer must satisfy the shareholding, utilisation, and lock-in conditions. |
Section 54: Exemption on Sale of a Residential House
Section 54 applies when an individual or HUF sells a long-term residential house and invests the capital gain in another residential house in India. In other words, this section provides relief when the taxpayer replaces one long-term residential property with another eligible residential property.
Time Limit for Buying or Constructing the New House
To claim the exemption, the taxpayer must:
- Purchase the new house within one year before selling the old house;
- Purchase the new house within two years after the sale; or
- Construct the new house within three years after the sale.
For example, suppose a taxpayer sells a residential property in Greater Noida on 15 July 2026.
In that case, the taxpayer may generally purchase an eligible house:
- On or after 15 July 2025; or
- On or before 14 July 2028.
Alternatively, the taxpayer may construct the new house within three years from the date of sale. Therefore, taxpayers should carefully track the purchase and construction dates while planning the exemption.
How the Exemption Is Calculated
The exemption is the lower of:
- The long-term capital gain; or
- The amount invested in the new residential house.
For example:
- Long-term capital gain: ₹40 lakh
- Amount invested in the new house: ₹55 lakh
In this case, the taxpayer may claim an exemption of ₹40 lakh because the exemption cannot exceed the capital gain. However, if the taxpayer invests only ₹30 lakh, the exemption will generally remain limited to ₹30 lakh. As a result, the remaining ₹10 lakh will remain taxable. Thus, the amount invested directly affects the final exemption.
Maximum Exemption Limit of ₹10 Crore
The law restricts the eligible investment under Section 54 to ₹10 crore. Therefore, even if the taxpayer invests more than ₹10 crore in the new residential property, the exemption calculation will consider only ₹10 crore. Accordingly, any investment above this limit will not increase the exemption.
Option to Purchase Two Residential Houses
A taxpayer may invest the capital gain in two residential houses in India if the long-term capital gain does not exceed ₹2 crore. However, the taxpayer can use this option only once in their lifetime. Therefore, taxpayers should use this option only after carefully considering their long-term property and tax planning.
Lock-in Period for the New House
The taxpayer should not sell the new house within three years from the date of purchase or construction. If the taxpayer sells the new house before completing three years, the law may withdraw or adjust the earlier exemption while calculating the capital gain on the new property.
Consequently, the taxpayer may face a higher tax liability in the year of sale. Therefore, the taxpayer should always review the tax impact before selling the replacement house.
Section 54F: Exemption on Sale of a Plot or Other Long-Term Asset
Section 54F applies when an individual or HUF sells a long-term capital asset other than a residential house and invests the net sale consideration in one residential house in India.
For instance, this provision may apply to the sale of:
- A residential plot
- A commercial plot
- Commercial property
- Gold or jewellery
- Shares and securities
- Other eligible long-term capital assets
Therefore, taxpayers commonly use Section 54F when they sell a plot and purchase a residential house.
Main Difference Between Sections 54 and 54F
Section 54 generally requires the taxpayer to invest the capital gain. In contrast, Section 54F generally requires the taxpayer to invest the entire net sale consideration to claim a full exemption.
This difference directly affects the exemption amount. Therefore, taxpayers should not apply the Section 54 method while calculating an exemption under Section 54F.
Proportionate Exemption Under Section 54F
If the taxpayer invests only part of the net consideration, the law allows a proportionate exemption.The formula is:
Capital gain exemption = Long-term capital gain × Amount invested in new house ÷ Net consideration
For example:
- Net consideration from the plot: ₹1 crore
- Long-term capital gain: ₹60 lakh
- Amount invested in the new house: ₹75 lakh
The exemption will be:
₹60 lakh × ₹75 lakh ÷ ₹1 crore = ₹45 lakh
Therefore:
- Total long-term capital gain: ₹60 lakh
- Exemption under Section 54F: ₹45 lakh
- Taxable long-term capital gain: ₹15 lakh
Thus, the taxpayer receives only a proportionate exemption because the entire net consideration was not invested.
Meaning of Net Consideration
Net consideration generally means:
Sale consideration
Less: Expenses incurred wholly and exclusively in connection with the transfer
Eligible expenses may include:
- Brokerage
- Legal expenses directly related to the sale
- Transfer charges
- Other eligible selling expenses
However, repayment of an existing loan does not normally reduce the net consideration.
For example, suppose a taxpayer sells a plot in Greater Noida for ₹1 crore and uses ₹25 lakh to repay an old loan. In such a case, the loan repayment will not automatically qualify as an investment in the new residential house. Moreover, it will not normally reduce the net consideration for Section 54F. Therefore, taxpayers should separate eligible transfer expenses from personal uses of the sale proceeds.
Restriction on Ownership of Other Houses
On the date of selling the original asset, the taxpayer must not own more than one residential house, apart from the new house.
In addition, the taxpayer should not:
- Purchase another residential house within one year after the transfer; or
- Construct another residential house within three years after the transfer.
If the taxpayer violates these conditions, the Income Tax Department may deny or withdraw the exemption. Accordingly, taxpayers must review all residential properties owned by them before claiming Section 54F.
Maximum Limit of ₹10 Crore
The law caps the net consideration considered under Section 54F at ₹10 crore. Therefore, the taxpayer cannot increase the exemption by considering an amount above ₹10 crore.
In other words, even where the sale value exceeds ₹10 crore, the exemption calculation will remain subject to the statutory ceiling.
Section 54EC: Investment in Capital Gain Bonds
Section 54EC provides an alternative for taxpayers who sell long-term land, a building, or both but do not wish to purchase another property. Instead, the taxpayer may invest the capital gain in specified capital gain bonds within six months from the date of transfer.
This exemption may be available to:
- Individuals
- HUFs
- Partnership firms
- LLPs
- Companies
- Other eligible taxpayers
Therefore, Section 54EC can help taxpayers who want tax relief without investing in another immovable property.
Eligible Capital Gain Bonds
The Central Government notifies the bonds that qualify under Section 54EC. Depending on the relevant notification, eligible bonds may include bonds issued by:
- National Highways Authority of India
- Rural Electrification Corporation Limited
- Housing and Urban Development Corporation Limited
- Indian Renewable Energy Development Agency
- Other notified organisations
However, not every bond qualifies for the exemption. Therefore, before investing, the taxpayer should verify whether the particular bond issue qualifies under Section 54EC.
Maximum Investment Limit
The maximum eligible investment under Section 54EC is ₹50 lakh.
The exemption is the lower of:
- The capital gain;
- The amount invested in eligible bonds; or
- ₹50 lakh.
For example:
- Long-term capital gain: ₹70 lakh
- Investment in eligible bonds: ₹50 lakh
In this situation, the taxpayer may claim an exemption of ₹50 lakh. Consequently, the remaining ₹20 lakh will remain taxable.
Thus, the ₹50 lakh limit applies even when the actual capital gain exceeds that amount.
Lock-in Period for Capital Gain Bonds
The bonds generally carry a five-year lock-in period.
During this period, the taxpayer should not:
- Transfer the bonds;
- Convert the bonds into money; or
- Obtain a prohibited loan or advance against the bonds.
If the taxpayer violates these conditions, the law may withdraw the earlier exemption.
Therefore, the taxpayer should invest only after considering the long lock-in period and limited liquidity.
Section 54B: Exemption on Sale of Agricultural Land
Section 54B applies when an individual or HUF sells eligible agricultural land and purchases another agricultural land.
The taxpayer must purchase the new agricultural land within two years from the date of transfer.
Thus, this provision allows the taxpayer to continue agricultural activity without immediately paying tax on the entire capital gain.
Agricultural-Use Requirement
The taxpayer, the taxpayer’s parents, or the HUF must have used the old land for agricultural purposes during the prescribed two-year period immediately before the transfer.
Therefore, merely mentioning “agricultural land” in the sale deed may not be enough.
Instead, the taxpayer should preserve evidence such as:
- Khasra and khatauni records
- Crop records
- Revenue records
- Agricultural electricity bills
- Irrigation records
- Sale receipts for agricultural produce
- Photographs of agricultural activity
- Other supporting documents
Moreover, strong documentation can help the taxpayer defend the exemption during assessment proceedings.
Calculation of Exemption
The exemption is the lower of:
- The capital gain; or
- The amount invested in the new agricultural land.
For example:
- Capital gain: ₹30 lakh
- Cost of new agricultural land: ₹24 lakh
In this case, the taxpayer may claim an exemption of ₹24 lakh. Therefore, the remaining ₹6 lakh will remain taxable.
Accordingly, a higher investment in eligible agricultural land may provide a higher exemption, subject to the amount of capital gain.
Lock-in Period for the New Agricultural Land
The taxpayer should not sell the new agricultural land within three years from the date of purchase.
If the taxpayer sells it earlier, the law may withdraw or adjust the earlier exemption.
Therefore, taxpayers should consider their long-term agricultural plans before making the investment.
Section 54D: Compulsory Acquisition of Industrial Property
Section 54D applies when the government compulsorily acquires land or a building used for an industrial undertaking.
The taxpayer must use the compensation to purchase or construct another land or building for:
- Shifting the existing industrial undertaking;
- Re-establishing the industrial undertaking; or
- Setting up another industrial undertaking.
In addition, the taxpayer must complete the investment within three years after receiving the compensation.
This provision may apply when a government department, industrial authority, or development authority compulsorily acquires industrial land or a building.
Therefore, industrial taxpayers should review Section 54D before using compensation for any other purpose.
Section 54EE: Investment in Notified Funds
Section 54EE allows an exemption when a taxpayer invests long-term capital gains in units of a fund notified by the Central Government for financing start-ups.
The taxpayer must generally invest within six months from the date of transfer.
However, not every mutual fund, start-up fund, or alternative investment fund qualifies.
Therefore, the taxpayer must first verify whether the government has specifically notified the fund.
In addition, the taxpayer must follow the prescribed investment limit and lock-in conditions.
Thus, taxpayers should not claim this exemption merely because they invested in a start-up-related fund.
Section 54GB: Investment in an Eligible Company or Start-up
Section 54GB provides a specialised exemption in certain cases where an individual or HUF sells an eligible residential property and invests the net consideration in equity shares of an eligible company or start-up.
The company must then use the money to purchase eligible new business assets.
However, the taxpayer must carefully comply with conditions relating to:
- The nature of the original property
- The date of transfer
- The type of company
- The taxpayer’s shareholding
- The use of funds
- Eligible plant and machinery
- Deposit of unutilised funds
- The lock-in period
Since Section 54GB contains several technical and time-linked conditions, the taxpayer should verify whether it applies to the relevant transaction before claiming the exemption.
Therefore, professional review becomes especially important in Section 54GB cases.
Capital Gains Account Scheme
Sometimes, the taxpayer cannot purchase or construct the new asset before the due date for filing the income tax return.
In such a situation, the taxpayer may deposit the unutilised amount in a Capital Gains Account Scheme account.
This scheme allows the taxpayer to preserve the exemption while completing the investment within the final statutory period.
Amount to Be Deposited
Under Section 54, the taxpayer generally needs to deposit the unutilised capital gain.
On the other hand, under Section 54F, the taxpayer generally needs to deposit the unutilised portion of the net consideration required for claiming the exemption.
Therefore, the deposit amount will depend on the exemption section involved.
Deadline for Making the Deposit
The taxpayer should deposit the amount before the applicable due date for filing the income tax return.
However, keeping the money in a normal savings account, current account, or fixed deposit will not satisfy the Capital Gains Account Scheme requirement.
Therefore, taxpayers should open the prescribed account before the deadline instead of waiting until the property purchase is finalised.
Use of the Deposited Amount
The taxpayer can withdraw money from the account to purchase or construct the eligible asset.
However, the taxpayer should:
- Use the amount only for the eligible purpose;
- Preserve all bills and payment receipts;
- Follow the prescribed withdrawal procedure; and
- Complete the purchase or construction within the final statutory period.
Moreover, the taxpayer should maintain a clear link between the withdrawals and the eligible property payments.
Tax Treatment of the Unused Amount
If the taxpayer does not use the amount within the prescribed period, the unused amount may become taxable as long-term capital gain in the year in which the investment period expires.
Therefore, depositing the amount in the scheme only postpones the investment requirement; it does not remove it.
Does Loan Repayment Qualify for Exemption?
Repayment of a loan does not automatically qualify as a new investment.
For example, suppose a taxpayer sells a plot for ₹80 lakh and uses:
- ₹20 lakh to repay an existing home loan; and
- ₹60 lakh to purchase a new residential house.
Under Section 54F, the taxpayer will generally receive the exemption based on the amount invested in the new house. The taxpayer cannot normally treat the old loan repayment as a new investment.
However, the position may differ where the taxpayer had already purchased the eligible new house with a housing loan and later used the sale proceeds to repay that loan.
Courts have examined such cases based on:
- The date of purchase
- The date of sale
- The source of funds
- The timing of the loan
- The connection between the sale proceeds and the new house
Therefore, taxpayers should obtain case-specific advice before claiming an exemption based on loan repayment.
In addition, they should preserve the loan documents, bank statements, and property payment records.
Can the Taxpayer Purchase the New House Jointly?
A taxpayer may purchase the new house jointly with a spouse or another family member.
However, the Income Tax Department may examine:
- The taxpayer’s actual contribution
- The ownership share
- The source of payment
- The name appearing in the sale deed
- The beneficial ownership of the property
For example, suppose a husband and wife purchase a property in Greater Noida in a 50:50 ratio, but only the husband sold the original asset.
In such a case, the department may examine whether the husband can claim an exemption for the entire investment or only for the amount that he actually contributed.
Therefore, the purchase deed and banking records should clearly establish the taxpayer’s contribution and ownership.
Moreover, the taxpayer should avoid unclear or informal funding arrangements.
Can the New House Be Purchased in a Parent’s Name?
Purchasing the new house only in the name of a parent creates a significant tax risk.
For example, suppose a son sells a plot and uses the entire sale amount to purchase a house only in his father’s name.
The Income Tax Department may deny the son’s exemption because he does not legally own the new house.
Although some court decisions have allowed exemptions where taxpayers purchased properties in the names of close family members, other courts have taken a stricter view.
Therefore, the safer approach is to purchase the new house in the taxpayer’s own name or include the taxpayer as a genuine co-owner.
In addition, the sale deed and payment trail should clearly reflect the taxpayer’s ownership and contribution.
Documents Required to Claim the Exemption
The taxpayer should preserve complete evidence to support the exemption.
Important documents include:
- Original purchase deed
- Sale deed
- New property purchase deed
- Builder-buyer agreement
- Possession letter
- Construction bills
- Bank statements
- Housing loan statements
- Brokerage receipts
- Legal-expense receipts
- Capital Gains Account Scheme passbook
- Capital gain bond certificates
- Agricultural land records
- Valuation report
- Proof of improvement expenses
- Payment receipts
- Stamp-duty receipts
- Registration receipts
- Tax deduction certificates
Proper documentation becomes even more important when the taxpayer sells an ancestral or old property and uses the fair market value as on the prescribed base date.
Furthermore, complete records can help the taxpayer answer future notices or assessment queries.
How to Report the Exemption in the Income Tax Return
The Income Tax Department does not grant the exemption automatically.
Instead, the taxpayer must calculate and claim the exemption in the capital gains schedule of the applicable income tax return.
Depending on the taxpayer’s income, the taxpayer may file:
- ITR-2, where the individual or HUF does not have business or professional income; or
- ITR-3, where the individual or HUF has business or professional income.
The taxpayer may need to report:
- Sale consideration
- Stamp-duty value
- Cost of acquisition
- Indexed cost, where allowed
- Improvement expenses
- Transfer expenses
- Total capital gain
- Amount invested
- Date of investment
- Capital Gains Account Scheme deposit
- Applicable exemption provision
- Taxable capital gain
Therefore, the taxpayer must enter all details correctly in Schedule CG.
Moreover, the amount claimed in the return should match the supporting property, banking, bond, and deposit records.
Common Mistakes Taxpayers Should Avoid
Taxpayers often lose valid exemptions because they fail to follow the prescribed conditions.
Common mistakes include:
- Investing only the capital gain under Section 54F instead of the net consideration
- Missing the purchase or construction deadline
- Failing to deposit the amount in the Capital Gains Account Scheme
- Keeping the money in a normal savings account
- Purchasing the property only in another person’s name
- Claiming loan repayment as a new investment without checking the facts
- Owning more houses than Section 54F permits
- Selling the new property during the lock-in period
- Investing in a bond that does not qualify
- Failing to report the exemption in Schedule CG
- Not preserving proof of investment or construction
- Treating rural and urban agricultural land in the same manner
- Ignoring the stamp-duty value while calculating capital gains
- Applying the wrong holding period
- Claiming an exemption under the wrong section
Therefore, taxpayers should review the exemption conditions before completing the sale rather than after filing the return.
Practical Example of Section 54F
Suppose Mr A sells a long-term plot in Greater Noida for ₹1.50 crore.
The transaction details are:
- Sale consideration: ₹1,50,00,000
- Transfer expenses: ₹2,00,000
- Net consideration: ₹1,48,00,000
- Long-term capital gain: ₹90,00,000
- Investment in the new residential house: ₹1,20,00,000
Since Mr A did not invest the entire net consideration, he will receive a proportionate exemption.
The exemption will be:
₹90,00,000 × ₹1,20,00,000 ÷ ₹1,48,00,000
Exemption = approximately ₹72,97,297
Therefore:
- Total long-term capital gain: ₹90,00,000
- Section 54F exemption: approximately ₹72,97,297
- Taxable long-term capital gain: approximately ₹17,02,703
However, Mr A must also satisfy the house-ownership and other conditions under Section 54F.
Thus, the investment amount alone does not decide the final exemption.
Conclusion
Capital gain exemptions can help taxpayers save a substantial amount of tax. However, each exemption applies to a specific type of asset and requires the taxpayer to follow separate investment, ownership, and time-limit conditions.
For instance, Section 54 generally applies when the taxpayer sells a long-term residential house and reinvests the capital gain in another residential house.
In contrast, Section 54F generally applies when the taxpayer sells another long-term asset, such as a plot, and invests the net consideration in a residential house.
Similarly, taxpayers may consider capital gain bonds, agricultural land, industrial property, or other notified investments depending on the nature of the original asset.
Moreover, property transactions in Greater Noida and Noida often involve high values, delayed possession, builder agreements, joint ownership, and housing loans. Therefore, taxpayers should plan the exemption before completing the sale.
Ultimately, proper planning, timely investment, accurate return filing, and complete documentation can protect the exemption and reduce the risk of receiving an income tax notice.
Frequently Asked Questions
1. Can I save capital gains tax by purchasing another residential house?
Yes. You may claim an exemption if the original asset, new house, investment amount, and investment period satisfy the applicable conditions.
2. I sold a residential plot. Which exemption may apply?
Section 54F may apply because a plot does not qualify as a residential house. Therefore, you must generally invest the net consideration in one residential house and satisfy the ownership conditions.
3. I sold a residential house. Do I need to invest the entire sale amount?
No. Under Section 54, you generally need to invest the capital gain rather than the entire sale consideration.
4. I sold a plot. Do I need to invest only the capital gain?
No. To claim a full exemption under Section 54F, you generally need to invest the entire net consideration. However, if you invest only part of it, you will receive a proportionate exemption.
5. Can I purchase the new house before selling the old property?
Yes. Sections 54 and 54F generally allow the taxpayer to purchase the qualifying house within one year before the sale of the original asset.
6. Can I purchase two houses under Section 54?
Yes, provided the long-term capital gain does not exceed ₹2 crore. However, you can use this option only once in your lifetime.
7. Can I claim Section 54F if I already own one residential house?
Yes, subject to the other conditions. However, you should not own more than one residential house, excluding the new house, on the date of transfer.
8. Can I claim Section 54F if I own two houses?
Generally, no. Owning more than one residential house on the date of transfer may make you ineligible.
9. Does repayment of a housing loan qualify for exemption?
Loan repayment does not automatically qualify. Instead, the answer depends on the timing of the purchase, loan, sale, and use of the sale proceeds.
10. Can I purchase the new house in my spouse’s name?
The department may question the exemption if you do not legally own the property. Nevertheless, a joint purchase may qualify if you clearly establish your investment and ownership.
11. Can I purchase the house in my father’s or mother’s name?
This creates a high risk of disallowance. Therefore, the safer approach is to purchase the new property in your own name or include yourself as a genuine co-owner.
12. Can I invest in capital gain bonds instead of buying a house?
Yes, if the capital gain arises from eligible long-term land, a building, or both. However, you must invest in eligible notified bonds within six months.
13. What is the maximum exemption under Section 54EC?
The maximum eligible investment and exemption under Section 54EC is ₹50 lakh, subject to the applicable conditions.
14. Can I invest ₹50 lakh in two different financial years?
You should not assume that splitting the investment between two financial years will increase the exemption beyond the overall statutory limit connected with the transfer.
15. What should I do if I cannot purchase the house before filing my return?
You may deposit the required unutilised amount in a Capital Gains Account Scheme account before the applicable deadline.
16. Can I keep the sale amount in a normal savings account?
No. A normal savings account or fixed deposit does not satisfy the Capital Gains Account Scheme requirement.
17. What happens if I do not use the amount deposited in the Capital Gains Account Scheme?
The unused amount may become taxable as a capital gain when the prescribed investment period expires.
18. Can I claim exemption by purchasing agricultural land?
Yes. You may claim an exemption under Section 54B if you sell eligible agricultural land, purchase another agricultural land within two years, and satisfy the agricultural-use conditions.
19. Can I purchase rural agricultural land under Section 54B?
Yes, the new land may generally be agricultural land, subject to the applicable conditions. However, you must separately examine whether the original land qualifies as a capital asset.
20. Does the Income Tax Department grant the exemption automatically?
No. Instead, you must calculate and report the exemption in the capital gains schedule of your income tax return.
21. Which ITR form should I use for capital gains?
An individual without business or professional income generally files ITR-2. On the other hand, an individual with business or professional income generally files ITR-3.
22. Can I sell the new house immediately after claiming the exemption?
No. You should not sell it during the prescribed lock-in period. Otherwise, the law may withdraw or adjust the earlier exemption.
23. Is there a ₹10 crore limit on residential-house exemptions?
Yes. The relevant provisions restrict the eligible investment or net consideration to ₹10 crore.
24. Does the Income-tax Act, 2025 apply to every earlier property transaction?
No. The Income-tax Act, 2025 applies from 1 April 2026. However, the Income-tax Act, 1961 may continue to govern earlier tax years and related proceedings under the transition provisions.
25. Should I plan the exemption before selling the property?
Yes. Early planning helps you review ownership conditions, investment deadlines, loan arrangements, joint ownership, and Capital Gains Account Scheme requirements.