Nidhi | Jun 12, 2025 |

I sold a house property and brought another one: Can I get some relief in Income Tax

Have you bought a property and are thinking of selling it? Many individuals often get confused about whether capital gains tax is levied on the sale of property or not. Capital Gains are the profit made after selling a capital asset whose value has increased over the holding period. In other words, it is the increase in the value of a capital asset over its original purchase price and is realised when the asset is sold.

Capital gains are of two types: Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG). STCG arise when the asset is sold within a short-term period, usually up to 48 months. On the other hand, LTCG arise when you sell an asset after a period of 48 months.

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ITAT Allows 1.3 Cr Capital Gain Exemption u/s 54 on Sale of 2 Houses to Buy Joint Property: Read to Know More

When You Sell a Property, you may be required to pay capital gain tax; however, the Income Tax Act offers some relief under Section 54. Let us understand the Capital gains exemption under Section 54.

Table of Content

When can you claim Exemption u/s 54
Maximum Amount of Exemption u/s 54
How Can You Claim the Tax Exemption u/s 54?
Capital Gains Account Scheme
When Can the Exemption u/s 54 be Withdrawn?

When can you claim Exemption u/s 54

The exemption under section 54 is allowed only if you sell a residential house property or land attached to it and make a long-term capital gain. The other conditions to claim the exemption under this section are as follows:

If you reinvest the gain amount for the purchase of the construction of just one new residential house property in India.

To claim this exemption for investment in 2 house properties, the amount of LTCG should not be more than Rs. 2 crores. This option can be claimed once in a lifetime.

The exemption is only available to an Individual or a Hindu Undivided Family (HUF).

Also Read
ITAT Allows Capital Gain Exemption u/s 54 Despite Belated ITR

Maximum Amount of Exemption u/s 54

You can claim the lowest of the following three:

The amount of capital gains you made,
Rs. 10 crores, or
The total amount you invested in the new house property, including any amount deposited in a Capital Gains Account Scheme.

How Can You Claim the Tax Exemption u/s 54?

To claim the tax benefit, you must:

purchase another residential house in India within 1 year before or 2 years after the sale of the old house, or,

Construct a new house in India within 3 years from the date of transfer of house property.

Capital Gains Account Scheme

If the taxpayers have not used the capital gains to purchase or construct a residential house by the due date for filing their income tax return, they can deposit the amount in a Capital Gains Account to claim the exemption from capital gains. The amount deposited in the Capital Gains Account Scheme is required to be utilised within the specified period.

When Can the Exemption u/s 54 be Withdrawn?

In case you do not use the deposited amount to purchase a house property within 2 years or construct a house property within 3 years from the date of transfer, the unused deposited amount will be treated as long-term capital gains.
When you transfer the new house before 3 years from the date of purchase/construction, the tax exemption you claimed earlier will be withdrawn. The amount of capital gains that was exempted earlier will be deducted from the cost of the new house.

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Tags: Income Tax

Author Bio

Name: Nidhi

Designation: Content Writer

Company: Studycafe

Location: Delhi, India

Total Posts: 1451

Nidhi is a skilled content writer specializing in personal finance. She creates clear, engaging articles on mutual funds, investments, insurance, and wealth-building strategies. With a passion for simplifying complex financial topics, Nidhi helps readers make informed money decisions with confidence. She can be reached at [email protected]

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