Section 54 and 54F Capital Gains Exemption 2026: How to Save Tax When You Sell Property

By Nitish Bharadwaj · Published Jul 21, 2026 · 6 min

Section 54 exempts long-term capital gains from selling a residential house if you reinvest the gain — not the full sale value — into another house within the prescribed window, capped at ₹10 crore. Section 54F applies when you sell any other long-term asset, like shares, land, or gold, and requires reinvesting the entire net sale consideration proportionately, while barring you from owning more than one other house at the time of transfer. Miss the deadline, and a Capital Gains Account Scheme deposit can still preserve the exemption.

Sell a house and reinvest the gain in another one, and most people correctly reach for Section 54. Sell shares, gold, or a plot of land instead and use the money to buy a house, and Section 54F applies — a different provision with a stricter set of conditions that trips up far more claims than the section number suggests. Here's exactly what each one requires, why 54F punishes partial reinvestment harder than 54 does, and what to do if you can't complete the purchase before your tax return is due.

Section 54 vs Section 54F at a Glance

Before you get to reinvestment, remember that if the sale value crosses ₹50 lakh, the buyer — not you — deducts 1% TDS at the time of payment under Section 194IA and deposits it against your PAN; our Section 194IA TDS on property sale guide covers exactly how that credit shows up in your Form 26AS and gets adjusted against the capital gains tax computed here.

Why Section 54F Punishes Partial Reinvestment Harder

Section 54 only asks you to reinvest the capital gain — if you sold a house for ₹1.5 crore with a gain of ₹60 lakh and put ₹60 lakh into the new house, the entire gain is exempt regardless of what the house actually cost. Section 54F is stricter because it's tied to the full sale consideration, not the gain. Sell shares for a net consideration of ₹80 lakh with a gain of ₹60 lakh, and reinvest only ₹40 lakh of that into a house, and the exemption is proportionate: ₹60 lakh × (₹40 lakh ÷ ₹80 lakh) = ₹30 lakh exempt, leaving the remaining ₹30 lakh of gain taxable. Reinvest the full ₹80 lakh, and the entire gain becomes exempt — but reinvesting only the gain amount, as you would under Section 54, doesn't fully shield you under 54F.

Missed the Deadline? The Capital Gains Account Scheme Can Still Save the Exemption

Both sections require reinvestment within a fixed window, but that window often runs past your ITR filing due date. If you haven't purchased or completed construction by the time you file, deposit the unutilised amount in a Capital Gains Account Scheme (CGAS) account at an authorised bank before filing your return, and claim the exemption based on that deposit. You then have the remaining window — up to 2 years for purchase or 3 years for construction from the original transfer — to actually use that deposited amount. If it stays unused once that period lapses, the deposited amount is treated as a taxable long-term capital gain in the year the period ends, not the original year of sale. Our complete CGAS guide covers Type A vs Type B accounts, how to deposit and withdraw using Form C, and the exact trap that catches taxpayers who forget the utilisation window. This runs on the same ITR filing timeline as any other capital gain, so track the CGAS deadline alongside your regular filing deadline, not as a separate calendar.

Section 54EC Bonds — When You Don't Want to Buy Another House

Section 54EC offers a third route, available only for long-term capital gains from selling land or a building (not shares, gold, or other assets covered under 54F). Instead of buying a house, you invest the gain — up to ₹50 lakh per financial year — into specified bonds within 6 months of the sale. NHAI stopped issuing these bonds from April 2022; the current issuers are REC, PFC, IRFC, and HUDCO, all carrying AAA ratings and government backing. For the six-month deadline, the ₹50 lakh cap across two financial years, and whether the bonds actually beat paying tax, see our complete guide to Section 54EC bonds.

Bottom Line

Match the section to the asset you actually sold: Section 54 for a house, Section 54F for anything else being routed into a house, with the entire net sale consideration — not just the gain — needing reinvestment to escape tax proportionately. Check the one-house condition before assuming 54F applies to you, use a CGAS deposit to protect the exemption if a purchase or construction runs past your filing deadline, and consider 54EC bonds if you'd rather not buy property at all. For gains from other asset classes entirely, see how mutual fund capital gains and Sovereign Gold Bond gains are taxed instead.