Section 54 · Capital gains exemption on residential house
Sold your house? Buy another and save the tax.
- Asset sold
- Long-term residential house
- Reinvest in
- Residential house in India
- Window
- −1y / +2y buy · 3y build
- Exemption cap
- ₹10 crore
In plain English
Sell a residential house you've held for more than 2 years and roll the capital gain into another house in India — bought within 2 years or built within 3 — and that long-term gain escapes tax. The relief is now capped at ₹10 crore.
| Meaning | Number |
|---|---|
| Exemption cap | ₹10 crore |
What qualifies for the rollover
- Asset sold — Long-term residential house (held > 24 months)
- New house — purchase — 1 year before or 2 years after the sale date
- New house — construction — Completed within 3 years of the sale date
- Location — Must be a residential house situated in India
- Capital Gains Account Scheme — Park unutilised gain here before the ITR due date
- Two-house option — Once in a lifetime if capital gain ≤ ₹2 crore
What this section covers
Section 54 grants an exemption from long-term capital gains tax to individuals and HUFs who sell a residential house held for more than 24 months and reinvest the capital gain in another residential house in India — purchased within one year before or two years after the date of transfer, or constructed within three years. From AY 2024-25, the exemption is capped at ₹10 crore. Unutilised gain must be parked in a Capital Gains Account Scheme account before the due date of filing return. In specified cases a taxpayer may opt for exemption in two residential houses (once in a lifetime) if the gain does not exceed ₹2 crore.
The legal text
“Subject to the provisions of sub-section (2), where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of a long-term capital asset, being… a residential house… and the assessee has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India, then… the capital gain shall be dealt with in accordance with the following provisions…”
Old Act vs New Act
| Aspect | Act, 1961 | Act, 2025 |
|---|---|---|
| Section | 54 | 82 |
| Topic | Capital gains exemption on residential house | |
| Verdict | Renumbered — ceilings retained | |
| Notes | Restated as Section 82 under the Income-tax Act, 2025. The 1-year-before / 2-year-after / 3-year-construction window, the ₹10 crore investment cap and the once-in-a-lifetime two-house option (up to ₹2 crore gain) are retained. | |
Common confusion
Section 54 covers exemption when a residential house is SOLD and a residential house is BOUGHT. Section 54F covers sale of any other long-term capital asset followed by investment in a residential house. Section 54EC covers investment in specified bonds (up to ₹50 lakh).
Who should know this
Related sections
Based on the official Income-tax Act, 1961 and the published Income-tax Act, 2025 as available on the Income Tax Department website. Always verify against the published Act and consult a qualified professional.