Reinvesting a gain to save tax, the three main routes, and the rules that make them work
Three sections let you save capital-gains tax by reinvesting. Section 54 exempts the long-term gain on a residential house if you buy or build another residential house. Section 54F exempts the gain on any other long-term asset if you invest the net sale consideration in a residential house. Section 54EC exempts the gain (up to Rs 50 lakh a year) if you invest it in specified NHAI or REC bonds within six months, with a five-year lock-in. The 54 and 54F house exemption is capped at Rs 10 crore (from FA2023), and there are strict time limits, with a Capital Gains Account Scheme deposit to hold the money if you cannot reinvest before filing.
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Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact Income Tax Department. Read our editorial scope →
The three rollover routes
Each route fits a different situation.
Capital-gains rollover exemptions
Section
Sell
Reinvest in
What is exempt
54
A residential house (long-term)
Another residential house
The capital gain (capped Rs 10 crore)
54F
Any long-term asset except a house
A residential house
Proportionate to net consideration invested (capped Rs 10 crore)
54EC
Land or building (long-term)
NHAI / REC bonds
The gain, up to Rs 50 lakh/year
The time limits and the deposit account
For a house under Section 54 or 54F, you must buy the new house within one year before or two years after the sale, or construct it within three years. Section 54EC bonds must be bought within six months of the sale and held for five years. If you cannot complete the reinvestment before the due date for filing your return, you must park the unutilised amount in a Capital Gains Account Scheme (CGAS) deposit with a bank to preserve the exemption, then use it within the time limit.
warningIf you will not reinvest before your filing due date, deposit the gain in a Capital Gains Account Scheme account first. Forgetting this step is the most common way a genuine reinvestment plan loses the exemption.
54 vs 54F: a key difference
Under Section 54 (house to house), only the capital gain needs to be reinvested. Under Section 54F (any asset to a house), the whole net sale consideration must be reinvested to exempt the full gain, invest only part and the exemption is proportionate. Section 54F also requires that you do not own more than one other residential house on the date of transfer. Choose the route that matches what you sold, and plan the reinvestment before you sell, not after, because the clock and the caps are unforgiving.
tip54 reinvests only the gain; 54F reinvests the whole net consideration. If you sold a non-house asset and reinvest only part in a house, expect a proportionate (not full) exemption under 54F.
Income-tax Act 1961 s.54 (house to house) + s.54F (any asset to a house) (Income-tax Act 2025 s.82 + s.86)
Income-tax Act 1961 s.54EC (bonds, up to Rs 50 lakh, 5-year lock-in) (Income-tax Act 2025 s.85)
Capital Gains Account Scheme (deposit of unutilised gain before filing) + FA2023 Rs 10 crore cap
Frequently asked questions
How can I avoid tax on a property sale gain?+
By reinvesting under Section 54 (buy or build another residential house with the gain), Section 54F (invest the net consideration of a non-house asset in a house), or Section 54EC (put the gain, up to Rs 50 lakh a year, into NHAI or REC bonds within six months). Each has time limits and the 54/54F house exemption is capped at Rs 10 crore.
What is the difference between Section 54 and 54F?+
Section 54 applies when you sell a residential house and buy another, and you only need to reinvest the capital gain. Section 54F applies when you sell any other long-term asset and buy a house, and you must reinvest the whole net sale consideration to exempt the full gain, partial reinvestment gives a proportionate exemption.
What if I cannot reinvest before filing my return?+
Deposit the unutilised gain in a Capital Gains Account Scheme (CGAS) account with a bank before your return due date, then use it within the reinvestment time limit (two years to buy or three to construct a house). Failing to deposit it is the most common reason an intended reinvestment loses the exemption.
How much can I invest in 54EC bonds?+
Up to Rs 50 lakh in a financial year, in specified NHAI or REC (or other notified) bonds, invested within six months of the sale and held for five years. The exemption equals the gain invested, capped at that Rs 50 lakh. It suits gains on land or buildings where you do not want to buy another house.