Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
The three routes
- Section 54: reinvest the gain in a residential house
- Section 54EC: up to ₹50 lakh in NHAI/REC bonds within 6 months (5-year lock)
- CGAS: park the gain if you haven’t reinvested by the due date
Time limits
Buy 1 year before or 2 years after, or construct within 3 years. A ₹10 crore cap applies from FA 2023 — confirm current limits.
Conditions that make or break the exemption
Each route has conditions that decide whether the exemption actually holds. Under Section 54 the gain must go into one residential house in India, bought one year before or two years after the sale, or constructed within three years; you can invest in two houses once in a lifetime if the gain is up to ₹2 crore, and a ₹10 crore cap on the cost qualifying for exemption applies from 2023. Section 54EC needs the gain — up to ₹50 lakh — invested in NHAI or REC bonds within six months of sale, locked in for five years. The Capital Gains Account Scheme is the bridge: if you haven’t reinvested by the return due date, deposit the unspent gain in a CGAS account with a bank before that date to preserve the exemption, then use it for the purchase or construction within the time limit — money not used in time becomes taxable in the later year. Selling the new house within three years reverses the exemption. The key is matching the timeline and the documentation; missing the reinvestment window or the CGAS deposit date is what usually costs the exemption. Confirm the current limits per the Finance Act.