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How the exemption works
Exemption = the lower of the long-term capital gain and the amount invested in the new house. Only individuals and HUFs qualify. The investment counted is capped at ₹10 crore — gain above that is taxable.
Not bought yet? Use the Capital Gains Account Scheme
Any unspent amount must be deposited in a Capital Gains Account Scheme (CGAS) account at a bank before your ITR due date. Use it within the 2 or 3-year window; whatever stays unused becomes taxable as long-term gain in the year the window ends.
3-year lock-in
If the new house is sold within 3 years of purchase or construction, the exemption is withdrawn — the earlier exemption reduces the new house's cost when computing gain on that sale.
Worked example
Example: Flat bought 2015 for ₹40 lakh, sold in 2026 for ₹1.1 crore. LTCG (12.5% option, no indexation) = ₹70 lakh. She buys a new flat for ₹80 lakh within a year — the whole ₹70 lakh is exempt. Had she spent ₹50 lakh, ₹20 lakh would be taxable.
Common mistakes
- Missing the CGAS deposit before the ITR due date
- Buying the new house in a spouse's sole name — courts are divided; keep the seller as owner or co-owner
- Selling the new house within 3 years
Frequently asked questions
No. The new house must be in India.
Yes, for the same gain — part reinvested in a house and part in 54EC bonds — as long as the total exemption does not exceed the gain.
Last reviewed on 11 November 2026 by Vinay Jaglan, VJ & Associates. Law and portal screens change — verify before acting, or ask the office.
