Section 54 exempts a long-term capital gain on the sale of a residential house if you reinvest in another residential house. Section 54F exempts the long-term gain on any other asset if the whole net sale value goes into a residential house. Since AY 2024-25 the cost of the new house counts only up to ₹10 crore under both.
Facts checked: 9 October 2026. The one-year, two-year and three-year limits, the deposit under the capital gains account scheme and the 54F conditions were read on the Income Tax Department's pages for section 54 and section 54F. The ₹10 crore cap on the cost of the new asset (from AY 2024-25) is not in the text on those pages, which appears to pre-date the Finance Act 2023, so it rests on secondary sources: confirm it in the current Act text. This article covers sections of the Income-tax Act, 1961, which govern AY 2026-27 and earlier years. From tax year 2026-27 the Income-tax Act 2025 applies and renumbers these sections; use the section mapper to find the new numbers rather than relying on a table you cannot trace to the Act.
Section 54 and 54F side by side
| Point | Section 54 | Section 54F |
|---|---|---|
| Asset sold | Long-term residential house | Any long-term asset other than a residential house (shares, land, gold, a plot) |
| Who can claim | Individual or HUF | Individual or HUF |
| What must be reinvested | The capital gain | The whole net sale consideration, for full relief |
| Purchase window | 1 year before or 2 years after the sale | 1 year before or 2 years after the sale |
| Construction | Within 3 years after the sale | Within 3 years after the sale |
| Other houses | No such condition | Not more than one other residential house on the date of sale |
| Lock-in | New house not sold for 3 years | New house not sold for 3 years |
| Cap on cost of new asset | ₹10 crore from AY 2024-25 | ₹10 crore from AY 2024-25 |
Two further points from our own knowledge of the sections, to be checked against the Act. Section 54 allows two houses for a one-time claim where the gain is not more than ₹2 crore. Under 54F, buying another house within two years, or building one within three years, after the sale can withdraw the exemption.
Unspent money and the Capital Gains Account Scheme
If the new house is not bought or built before the return due date under section 139(1), the unspent amount should be deposited in the Capital Gains Account Scheme before that date. The deposit is treated as used. If it is still unspent when the three-year period ends, it becomes taxable as long-term capital gain in that year. Tribunals have differed on how strict the deposit rule is, so do not plan on relief for a missed deposit.
A worked example (illustrative)
Section 54. Asha sells a flat held for six years. Sale price ₹1.80 crore, indexed or computed long-term gain ₹80 lakh. She buys a new flat for ₹60 lakh within two years.
- Exemption: ₹60 lakh (the lower of gain and cost of new house)
- Taxable long-term gain: ₹20 lakh
Section 54F. Ravi sells listed shares for a net consideration of ₹1.20 crore, long-term gain ₹70 lakh, and buys a house for ₹90 lakh.
- Exemption: ₹70 lakh × ₹90 lakh ÷ ₹1.20 crore = ₹52.5 lakh
- Taxable long-term gain: ₹17.5 lakh
The cap. If Ravi's house cost ₹12 crore, only ₹10 crore is counted in the formula.
These numbers are invented to show the method. Use the capital gains tax calculator to test your own figures.
What a CA should keep on file
- Sale deed, purchase deed or builder agreement, with dates, and the cost of acquisition of the old asset.
- Proof of the net consideration (for 54F): sale price less expenses on transfer.
- A list of residential houses owned on the date of sale (54F).
- Payment proof for the new house, completion or occupation certificate for construction.
- CGAS passbook and the deposit date, if used.
- A diary note for the end of the three-year lock-in.
The capital gains computation working paper is a ready format for this.
Frequently asked questions
Can a company claim section 54 or 54F?
No. Both sections are limited to an individual or a HUF.
What is the difference between section 54 and 54F in one line?
Section 54 applies when the asset sold is itself a residential house and needs only the gain reinvested. Section 54F applies when the asset sold is anything else and needs the whole net consideration reinvested.
Is the ₹10 crore cap on the gain or on the new house?
It limits the cost of the new asset that can be taken into account, as per the Finance Act 2023 text reported by secondary sources. It applies from AY 2024-25.
Do these sections apply for tax year 2026-27?
For transfers in tax year 2026-27 onwards, the Income-tax Act 2025 applies and these sections carry new numbers. Confirm each number and condition against that Act, not this article.
For the wider picture, read how types of audit in India differ, or use the income tax calculator.
Statutory facts on this page are checked against their sources, and the page says where it relied on secondary reporting. How we verify · Report an error