Section 54 Capital Gains Exemption
Calculate Section 54 exemption on property LTCG by reinvesting in a new house. Also Section 54F for non-residential assets. Find net tax payable after reinvestment exemption.
Section 54/54F Capital Gains Exemption
Reinvest LTCG in new property → save up to Rs 10Cr tax
Amount of LTCG (Sec 54) or sale proceeds (Sec 54F) invested in new house
Sec 54/54F exemption capped at Rs 10 crore from July 2023. Deadline: purchase within 2 years, construction within 3 years of sale.
Section 54 exemption has a Rs 10 crore cap (from July 2023). If your LTCG is Rs 12Cr and you reinvest in a new house worth Rs 12Cr, you can only exempt Rs 10Cr. Tax is payable on the remaining Rs 2Cr gain. Plan accordingly for high-value property transactions.
Section 54 — LTCG Exemption on Property Reinvestment
Section 54 of the Income Tax Act provides full exemption from LTCG tax when you sell a residential property and reinvest the capital gains in another residential property. The new property must be purchased within 1 year before or 2 years after the date of sale, or constructed within 3 years. The exemption equals the amount reinvested (capped at the LTCG amount), subject to a maximum of Rs 10 crore.
Section 54F — for non-residential asset sellers
Section 54F applies when you sell any long-term capital asset other than a residential house — such as shares, commercial property, jewellery, or land — and invest the net sale consideration in a residential property. Unlike Section 54, the exemption under 54F is proportional: (Amount invested in new house ÷ Net sale consideration) × LTCG. To get full exemption, the entire net consideration must be reinvested.
Capital Gains Account Scheme (CGAS)
If you cannot reinvest in the new property before the ITR filing deadline (typically 31 July), deposit the unutilised capital gains in a Capital Gains Account Scheme with a scheduled bank. This preserves your exemption claim. The deposited funds must be used for the intended purpose (property purchase/construction) within the stipulated timeframe — unused amounts become taxable in the year the deadline lapses.
The Rs 10 crore cap (from July 2023)
A cap of Rs 10 crore on the Section 54 and 54F exemption was introduced effective 1 July 2023. For property transactions generating LTCG above Rs 10 crore, tax is payable on the excess even with full reinvestment. This primarily affects high-value urban property transactions in cities like Mumbai, Delhi, and Bengaluru where property prices have appreciated significantly.