Reviewed for current filing season: 10 June 2026

Capital Gains Exemption under Sections 54, 54F and 54EC

Sold a house, plot or other long-term asset in FY 2025-26? Long-term capital gains on immovable property are now taxed at 12.5% (without indexation) under Section 112, but the Income-tax Act still lets you reduce or eliminate this tax by reinvesting in a new house or in notified bonds. The conditions and deadlines are strict.

Quick answer: Section 54 — reinvest gains from one house into another (buy 1 year before/2 years after, or build in 3 years). Section 54F — reinvest the full sale proceeds of any other asset into a house. Section 54EC — invest up to Rs 50 lakh in REC/PFC/IRFC bonds within 6 months, locked in for 5 years. The new-house cost counted under 54/54F is capped at Rs 10 crore.

Section 54: selling a house, buying a house

Available to individuals and HUFs on long-term gains (property held over 24 months) from a residential house.
Exemption = lower of the capital gain or the cost of the new residential house in India (capped at Rs 10 crore).
Timelines: purchase within 1 year before or 2 years after the transfer, or complete construction within 3 years.
If the capital gain is up to Rs 2 crore, you can invest in two houses — a once-in-a-lifetime option.
Withdrawal: selling the new house within 3 years reduces its cost by the exemption claimed, so the earlier exemption is effectively taxed then.

Section 54F: selling any other asset, buying a house

Applies to long-term gains from any asset other than a residential house — a plot, commercial property, unlisted shares, gold and similar assets.
You must invest the entire net sale consideration (not just the gain) to get full exemption; partial investment gives a proportionate exemption. The Rs 10 crore cap applies here too.
Conditions: you must not own more than one residential house (other than the new one) on the transfer date, and must not purchase another house within 2 years or construct one within 3 years.
Withdrawal: breaching these conditions, or selling the new house within 3 years, makes the exempted gain taxable in that year.

Section 54EC: capital gains bonds

Available on long-term gains from land or building (or both) — invest within 6 months of the transfer date.
Eligible bonds are currently issued by REC, PFC and IRFC (NHAI stopped issuing 54EC bonds; older NHAI bonds remain valid for past investments).
Limit: Rs 50 lakh per financial year for gains from the same transfer; lock-in 5 years, non-transferable, and a loan against them counts as a transfer.
Interest (around 5.25% per annum) is fully taxable each year — only the principal enjoys the capital gains exemption.

Capital Gains Account Scheme (CGAS) deadline

If the gain is not reinvested before you file your ITR, deposit the unutilised amount in a CGAS account on or before the due date under Section 139(1) — 31 July 2026 for most individuals for FY 2025-26 — and claim the exemption in the return.
Use the deposit within 2 years (purchase) or 3 years (construction). Any amount left unutilised when the period expires is taxed as capital gains of that later year.
Amounts withdrawn from CGAS must be used for the house within 60 days.

Section 54 in action

Asha sells a flat for Rs 1.9 crore with LTCG of Rs 60 lakh and buys a new flat for Rs 75 lakh within a year. The new house cost exceeds the gain, so the entire Rs 60 lakh is exempt and her LTCG tax of about Rs 7.5 lakh (12.5%) becomes nil.

Section 54F proportionate

Vikram sells a plot for Rs 1 crore (LTCG Rs 40 lakh) and invests Rs 60 lakh of it in a house. Exemption = 40 lakh × 60/100 = Rs 24 lakh. The remaining Rs 16 lakh of gain is taxed at 12.5%, about Rs 2 lakh plus cess.

Section 54EC bonds

Joseph has LTCG of Rs 70 lakh from selling a commercial building. Within 6 months he invests Rs 50 lakh in REC bonds — that much gain is exempt. The balance Rs 20 lakh is taxed at 12.5% (Rs 2.5 lakh plus cess) unless he also uses Section 54F.

Which ITR form should be used?

ITR-2 for individuals with capital gains and no business income — exemptions are claimed in Schedule CG (Section D), with CGAS deposit details where applicable.
ITR-3 if you also have business or professional income.
ITR-1 cannot be used when there are taxable capital gains from property. See our capital gains tax guide for rates and computation.

Documents to keep ready

Sale deed and purchase deed of the asset sold, with stamp duty values and dates.
Proof of cost of acquisition and improvement (registry, bills) for computing the gain.
Purchase/construction agreement and payment proofs for the new house, or 54EC bond allotment advice.
CGAS account passbook/deposit proof if the amount is parked in the scheme.
TDS certificate (Form 16B — buyer deducts 1% under Section 194-IA on sales of Rs 50 lakh or more) and AIS entries — reconcile with our AIS and Form 26AS mismatch guide.

Get expert-assisted filing

All India ITR can compute your property capital gains, choose the best mix of Section 54, 54F and 54EC, check CGAS deadlines and prepare Schedule CG correctly before filing.

Plan your property capital gains with an expert

Related current ITR guides

File ITR Online AY 2026-27 filing steps and examples Old vs New Regime Compare slabs, deductions and examples Tax & Refund Calculator Estimate tax, refund or extra payable AIS/Form 26AS Mismatch Fix TDS, income and refund mismatches Belated, Revised & ITR-U Know which correction route applies Which ITR Form? ITR-1, ITR-2, ITR-3 or ITR-4 Rs 12 Lakh Tax-Free Section 87A rebate rules and examples Income Tax Act 2025 What changes from 1 April 2026

More AY 2026-27 tax guides

Save tax: Home loan benefits · NPS (80CCD) · Donations (80G) · Education loan (80E) · Interest income (80TTA/80TTB) · Form 15G/15H · Capital gains exemptions (54/54F/54EC)

Investors and traders: F&O and intraday tax · ESOP and RSU tax · Share buyback tax · Foreign income and Schedule FA · Gift tax (56(2)(x)) · HUF taxation

Calculators and tools: Income tax calculator · Advance tax calculator · 80C tax-saving calculator · NPS calculator · Gratuity calculator · EPF calculator · Crypto tax calculator · HRA calculator

Filing and compliance: Section 87A rebate · Marginal relief · Form 10-IEA · PAN-Aadhaar link · AIS and TIS · ITR-U updated return · Discard ITR and condonation · TDS on rent and property · Income Tax Act 2025

Frequently asked questions

How can I save tax on long-term capital gains from selling property?

Three main routes: Section 54 (reinvest gains from a residential house into another residential house in India), Section 54F (reinvest the sale proceeds of any other long-term asset into a residential house), and Section 54EC (invest up to Rs 50 lakh of gains from land or building into REC, PFC or IRFC capital gains bonds within 6 months).

What is the time limit to buy a new house under Section 54?

Purchase within 1 year before or 2 years after the date of sale, or construct within 3 years after the sale. If the money is not used by the ITR due date, deposit it in a Capital Gains Account Scheme account to keep the exemption.

What is the maximum exemption under Section 54 and 54F?

From AY 2024-25 onwards, the cost of the new house considered for exemption under Section 54 and 54F is capped at Rs 10 crore. Investment above that does not increase the exemption.

What is the lock-in period for 54EC bonds?

5 years. The bonds are non-transferable, and taking a loan against them or transferring them within 5 years withdraws the exemption. The investment limit is Rs 50 lakh per financial year.

Sources reviewed

This guide is for general understanding. Exemption claims depend on exact dates, ownership counts and how sale proceeds are deployed, so verify your timeline with a tax expert before committing funds or filing.