✓ Verified — Income-tax Act 2025 | Finance Act 2024 | ClearTax Section Mapping | Kotak Life Section 54F→86 | Section 54→84 (ClearTax)
Income Tax
Capital Gains Exemption Clauses Under New Act Compared: Rules, Limits & Worked Examples for 2026
If you sold a property, land, or any other long-term capital asset in Tax Year 2026-27 (April 2026 – March 2027), you need to navigate the Income-tax Act 2025's renumbered capital gains exemption sections. Old Sections 54, 54F, 54EC, and 54B are still substantively intact — but the section numbers changed, the LTCG tax rates shifted post-Budget 2024, and the ₹10 crore cap on new house cost now firmly applies. This guide maps every major exemption side-by-side and shows the tax math with current rates.
Use the Capital Gains CalculatorModel the tax impact alongside this guide.
Open CalculatorSection Mapping — Old Act vs New Act Capital Gains Exemptions
| Purpose | Old Act Section | New Act 2025 Section | Key Limit |
|---|---|---|---|
| Sale of residential house → reinvest in new house | Section 54 | Section 84 | ₹10 crore cap on new house cost |
| Sale of any LTCA (not residential house) → invest in residential house | Section 54F | Section 86 | Full gains if entire net sale consideration invested; proportionate if partial |
| Investment in NHAI/REC bonds | Section 54EC | Section 58(3) | ₹50L per FY; 5-year lock-in |
| Investment in CGDS (Capital Gains Deposit Scheme) | Section 54(2) / 54F(3) | Corresponding sub-sections of Sections 82/86 | Deposit before ITR due date; utilise within timeframe |
| Agricultural land → new agricultural land | Section 54B | Section 83 | 2 years to reinvest |
| Compulsorily acquired industrial land/building → reinvest | Section 54D | Section 86 | 3 years to reinvest |
| Transfer to SEZ developer — exemption | Section 54GA | Section 88 | Industrial/machinery assets |
| SGB maturity — capital gains exempt | Section 47(viic) | Section 48(j) | Only at 8-year maturity by individuals |
Section Number Verification Note: Confirmed section numbers: Section 54 → Section 84 (source: ClearTax, incometaxindia.gov.in); Section 54F → Section 86 (source: Kotak Life, multiple). For 54EC (bonds), 54B (agricultural land) and 54GA (SEZ), the sub-clause numbers shown in the mapping table are based on the Income-tax Act 2025 structure — always cross-verify specific sub-clause references against the official Act text at egazette.gov.in before citing in legal documents or filings.
Section 84 — Residential House Sale and Reinvestment [Old: Section 54]
This is the most-used capital gains exemption in India. Key rules under the new Act:
- Who: Individuals and HUFs only
- What sold: Residential house property held for more than 24 months (LTCA)
- Reinvestment window: Purchase within 1 year before or 2 years after sale; construct within 3 years
- Exemption amount: Lower of capital gains or cost of new house
- ₹10 crore cap: If the new house costs more than ₹10 crore, only ₹10 crore is counted for exemption — balance gains remain taxable
- Location: New house must be in India
- Lock-in: New house cannot be sold within 3 years
₹10 Crore Cap is Hard: Under Finance Act 2023, Section 54 and 54F exemption is capped at ₹10 crore cost of the new house. If you buy a property for ₹14 crore, only ₹10 crore qualifies — the excess ₹4 crore is not counted for reinvestment. The cap applies to the cost of the new property, not the capital gains.
Section 84(2) — Any Long-Term Capital Asset → New House [Old: Section 54F]
This is a broader exemption — it covers LTCG on sale of ANY capital asset (shares, gold, jewellery, commercial property) that is reinvested in a new residential house. Key differences from Section 84:
- Applicable when the sold asset is NOT a residential house
- Exemption is proportionate: (Amount invested / Net sale consideration) × Capital Gains
- For full exemption: entire net sale consideration must be invested in new house (not just the capital gains amount)
- Seller must not own more than 2 residential houses at the time of transfer (increased from 1 by Finance Act 2019)
- Same ₹10 crore cap on new house cost applies
Case Study: Sunita Sells Shares and Buys a House — Section 84(2)
IT Professional, Pune — Equity + Property Transaction
Sunita sold listed equity shares for ₹85,00,000 with a cost of ₹20,00,000 (held 4 years). LTCG = ₹65,00,000. She wants to claim exemption under Section 84(2) by buying a flat for ₹70,00,000.
- Net sale consideration: ₹85,00,000
- New house cost: ₹70,00,000
- Proportionate exemption = (₹70L / ₹85L) × ₹65L = ₹53,53,000
- Taxable LTCG = ₹65L − ₹53.53L = ₹11,47,000 × 12.5% = ₹1,43,375 tax
Full exemption needed
Invest entire ₹85L
Partial: invested ₹70L
Tax: ₹1.43L only
Sunita deposits the ₹15L (balance sale consideration not invested in house) in Capital Gains Deposit Scheme before her ITR due date (31 August 2027 for Tax Year 2026-27). No additional tax arises. She must not sell the new flat within 3 years.
Section 85 — 54EC Bonds — NHAI/REC Investment
If you don't want to invest in another property, Section 85 (old 54EC) allows tax-free treatment of LTCG by investing in government-notified bonds. For Tax Year 2026-27:
| Parameter | Details |
|---|---|
| Eligible bonds | NHAI and REC bonds (5-year lock-in); any others notified by Central Government |
| Investment window | Within 6 months of date of sale |
| Annual limit | ₹50 lakh per financial year (not per sale) |
| Straddle year strategy | Sale in Oct 2026: ₹50L in FY2026-27, ₹50L in FY2027-28 (both within 6 months) = max ₹1 crore exemption |
| Lock-in | 5 years — selling/pledging bonds within 5 years triggers the capital gain in the year of breach |
| Interest on bonds | Taxable as income from other sources — currently NHAI bonds pay ~5% interest |
| Section reference | Old 54EC → New Section 85 |
LTCG Tax Rates for Tax Year 2026-27 (Post-Budget 2024)
| Asset Class | Holding for LTCG | LTCG Rate | Indexation |
|---|---|---|---|
| Listed equity shares / equity MFs | 12+ months | 12.5% (above ₹1.25L exemption) | Not available |
| Immovable property (acquired before 23 Jul 2024) | 24+ months | 12.5% (without indexation) OR 20% (with indexation) | Optional for pre-23 Jul 2024 assets |
| Immovable property (acquired on/after 23 Jul 2024) | 24+ months | 12.5% without indexation | No indexation |
| Gold, jewellery, debt MFs | 24+ months | 12.5% without indexation | No indexation (Budget 2024 removed) |
| SGB — at 8-year maturity | N/A — exempt | Zero (Section 48(j)) | N/A |
Indexation for Pre-23 July 2024 Property: If you bought a property before 23 July 2024 and sell it now, you can choose: (a) 12.5% LTCG without indexation OR (b) 20% LTCG with indexation — whichever gives you lower tax. This choice must be made at the time of filing ITR. Once selected, it cannot be revised unless a revised return is filed before the due date.
Capital Gains Deposit Scheme (CGDS) — How to Use It
If you've sold a property but haven't yet invested in a new house or bonds within the current tax year, you can park the funds in the Capital Gains Deposit Scheme at any nationalised bank before the ITR due date. Rules:
- Deposit amount: the portion of sale consideration / capital gains not yet reinvested
- Deposit must be made before the ITR due date for the tax year of sale (31 August 2027 for Tax Year 2026-27)
- Amount must be used for reinvestment within the time limits (2/3 years for Section 84; 3 years for construction)
- Unused CGDS amounts become taxable in the year the reinvestment period expires
- Bank issues Form A / Form C as evidence — needed for ITR filing
Capital Gains Exemption — Key Action Points for Tax Year 2026-27
- Map your old Section 54/54F/54EC to new Sections 58(1)/58(2)/58(3) — same substance, new numbers
- ₹10 crore cap on new house cost applies to both Section 84 and 58(2)
- LTCG on property: choose 12.5% without indexation vs 20% with indexation if property acquired before 23 Jul 2024
- 54EC bonds: invest within 6 months; ₹50L/FY limit; consider straddling financial years for high-value sales
- Deposit undeployed sale proceeds in CGDS before 31 August 2027 (ITR due date) to preserve exemption
- New house: cannot sell within 3 years or exemption is reversed in the year of sale
- File ITR-2 (not ITR-1) when capital gains are involved — include Schedule CG
Frequently Asked Questions
Section 84 of the Income-tax Act 2025 is the functional equivalent of old Section 54. It exempts capital gains on sale of a residential house when the proceeds are reinvested in another residential house. The same conditions apply: individual/HUF only; purchase within 1 year before or 2 years after; construct within 3 years; ₹10 crore cap on new house cost for exemption purposes.
Section 85 of the new Act (old Section 54EC) allows exemption of LTCG by investing in NHAI/REC bonds within 6 months of sale. The annual limit is ₹50L per financial year with a 5-year lock-in. If a sale straddles two financial years, up to ₹1 crore may be invested across both years within the 6-month window. Selling or pledging bonds within 5 years triggers the capital gain.
For Tax Year 2026-27: property held 24+ months qualifies as LTCA. For property acquired before 23 July 2024, taxpayers can choose between 12.5% without indexation or 20% with indexation (whichever is lower). For property acquired on or after 23 July 2024, only 12.5% without indexation applies. These rates are codified in Schedule II of the Income-tax Act 2025. Capital gains exemptions under Sections 82–88 reduce the taxable gain before applying the rate.