BooksIQLONG-TERM capital gain on sale of a RESIDENTIAL HOUSE is exempt if reinvested in ONE residential house in India — purchased within 1 year before or 2 years after, or constructed within 3 years. Exemption = lower of the gain or the cost of the new house, capped at ₹10 crore (AY 2024-25+).
Key points
- §54 exempts LONG-TERM CAPITAL GAIN arising to an individual / HUF on transfer of a RESIDENTIAL HOUSE (held > 24 months) if the gain is reinvested in ONE residential house situated in INDIA.
- Timeline: PURCHASE within 1 year before or 2 years after the date of transfer, or CONSTRUCTION within 3 years.
- Exemption = the LOWER of the capital gain or the cost of the new house.
- From AY 2024-25 the maximum exemption is ₹10 CRORE.
- A once-in-a-lifetime option allows investment in TWO houses if the LTCG does not exceed ₹2 crore.
- Amount not utilised before the ITR due date must be deposited in the CAPITAL GAINS ACCOUNT SCHEME.
- If the new house is sold within 3 years, the exemption is withdrawn.
Reference: §54 ITA 1961 — under ITA 2025 (FY 26-27 onwards), this is §82
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