Capital Gains Exemptions on Property: Reinvesting in a House or Bonds

Long-term capital gains on property can be reduced or eliminated by reinvesting under specific exemptions. The rules are strict on timing and conditions. This guide covers them under the Income-tax Act, 1961; the Income-tax Act, 2025 continues similar exemptions from tax year 2026-27.

Selling a House, Buying a House

• Available on long-term gains from selling a residential house.
• Buy another residential house in India within one year before or two years after the sale, or construct one within three years.
• The exemption equals the amount reinvested, up to the gain.
• Once in a lifetime, where the gain is up to ₹2 crore, you can invest in two houses.
• The exemption is capped at ₹10 crore.

Specified Bonds

• Available on long-term gains from selling land or buildings.
• Invest in specified bonds — such as those of NHAI, REC, PFC or IRFC — within six months of the sale.
• Up to ₹50 lakh per financial year, with a five-year lock-in.

Selling Other Assets, Buying a House

• Available on long-term gains from assets other than a residential house, such as a plot, shares or gold.
• Invest the net sale consideration (not just the gain) in a residential house.
• Conditions apply on how many houses you own.
• Capped at ₹10 crore.

Capital Gains Account Scheme

If you haven't reinvested by the return due date, deposit the unused amount in a Capital Gains Account Scheme account with an authorised bank before that date to keep the exemption. Withdraw it only for the planned investment within the time limit.

Lock-ins

Selling the new house within three years can reverse the exemption. Bonds are locked in for five years.

Getting Help

Think Filing plans capital gains exemptions and tracks reinvestment deadlines.