Capital gains exemption calculator: sections 54, 54F, 54EC and 54B

Section 54 vs 54F: which house exemption applies?

It depends on what you sold. If it was a residential house, section 54 of the 1961 Act (now section 82 of the Income-tax Act, 2025) exempts the gain up to the cost of the new house — you only need to reinvest the gain. If it was land, a plot, a shop or any other long-term asset, section 54F (now section 86) applies, and you must reinvest the whole net sale price for a full exemption.

Under 54F the exemption is proportional: gain × amount invested ÷ net sale price. Worked example: land sold for ₹1 crore net with a ₹60 lakh gain; ₹50 lakh put into a new house exempts ₹60 lakh × 50 ÷ 100 = ₹30 lakh. Section 54F is not available if, on the date of sale, you already own more than one residential house besides the new one.

For both, a house cost above ₹10 crore is ignored. You can buy one year before or up to two years after the sale, or finish building within three years. If the gain from a house is ₹2 crore or less, section 54 lets you buy two houses instead of one — once in your lifetime.

How do 54EC bonds work?

Put up to ₹50 lakh of a long-term gain on land or a building into specified bonds — issued by bodies such as REC, PFC and IRFC — within six months of the sale, and that much of the gain is exempt. This is section 54EC of the old Act, now section 85. The bonds are locked in for five years and their interest is taxable.

The ₹50 lakh limit covers the year of sale and the next year together, so splitting purchases across March doesn’t double it. Bonds combine well with a house: continuing the example above, ₹30 lakh in bonds covers the rest of the ₹60 lakh gain, and an NRI saves about ₹8.58 lakh of tax (12.5% plus 10% surcharge and 4% cess).

Can you reinvest in agricultural land under section 54B?

Yes, if the land you sold was used for farming by you or a parent for the two years before the sale. Buy other agricultural land within two years and the gain is exempt up to its cost — section 54B, now section 83. This matters only for urban farmland; rural agricultural land isn’t a capital asset, so there is no gain to exempt.

There is a catch for NRIs and OCIs: FEMA does not let them buy agricultural land, so section 54B is in practice open only to residents. NRIs usually use a house or bonds instead.

What if you can’t buy the house before filing your return?

Deposit the unspent amount in a Capital Gains Account Scheme account at an authorised bank before the due date of your return — usually 31 July after the tax year ends — and claim the exemption. Then withdraw it to buy or build within the time limits.

Money still unused when the two or three years run out becomes taxable in that year. Selling the new house within three years also takes the exemption back. The scheme does not apply to 54EC bonds, which must be bought within six months.

What should NRIs know about these exemptions?

NRIs can claim all of these, but the new house must be in India. NRIs pay 12.5% on the gain without indexation, plus surcharge (capped at 15%) and 4% cess, so each lakh of gain exempted saves roughly ₹13,000–₹15,000.

The buyer still deducts TDS from the price. If you plan to reinvest, apply for a lower TDS certificate before the sale so that less is held back, and keep the bond certificates, sale deed of the new house or Capital Gains Account passbook for your return.