Section 54F · Capital gains exemption on investing in a residential house
Sell anything else, buy a house, save the tax.
- Asset sold
- Any LTCG asset except a house
- Reinvest in
- 1 residential house in India
- Time window
- 1 yr before / 2 yrs after (3 yrs to build)
- Cap (from FY 23-24)
- ₹10 crore
In plain English
If you sell a long-term asset that's NOT a house — say shares, gold or land — and put the entire sale value into buying or building one residential house in India, the long-term capital gain is exempt. Invest only part of it, and you get a proportional exemption.
| Meaning | Number |
|---|---|
| Time window | 1 yr before / 2 yrs after (3 yrs to build) |
| Cap (from FY 23-24) | ₹10 crore |
What qualifies for the new investment
- Buying a ready-built house — Within 1 year before or 2 years after the sale
- Constructing a house — Completed within 3 years of the sale
- Capital Gains Account Scheme — Park the money before the next ITR due date if not used
- Only one house — In India — overseas property does not qualify
What this section covers
Section 54F is available to individuals and HUFs on long-term capital gains from transfer of any capital asset other than a residential house, provided the net sale consideration (not just the gain) is reinvested in one residential house in India. Investment can be by purchase within 1 year before or 2 years after the sale, or by construction within 3 years. If only part of the consideration is reinvested, exemption is proportionate. Unutilised amount must be deposited in the Capital Gains Account Scheme before the ITR due date. From FY 2023-24, the reinvestment for this exemption is capped at ₹10 crore. The taxpayer must not own more than one other residential house on the date of transfer.
The legal text
“Where, in the case of an assessee being an individual or a Hindu undivided family, the capital gain arises from the transfer of any long-term capital asset, not 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…”
Old Act vs New Act
| Aspect | Act, 1961 | Act, 2025 |
|---|---|---|
| Section | 54F | 86 |
| Topic | Capital gains exemption on investing in a residential house | |
| Verdict | Renumbered — substantive conditions retained | |
| Notes | Restated as Section 86 under the Income-tax Act, 2025 with the same eligibility, time-windows and the ₹10 crore cap. | |
Common confusion
Section 54 (sale of a house, buy a house) is different from Section 54F (sale of any other asset, buy a house). Under 54F, the entire NET CONSIDERATION must be reinvested — not just the capital gain — to claim full exemption.
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.