Tax Planning

Capital Gains Exempt, when Reinvested

Published: 16 Dec, 2025

Updated: 12 March, 2026

Capital gains arising on sale or transfer of following assets are exempt from tax, to the extent specified by the Income Tax Act, 2025, if, either the capital gain arising on such sale or the net proceeds of such sale, as the case may be, is reinvested on eligible investments, within the time period specified.

Eligible Taxpayer (s)

Capital Asset Sold or Transferred

Type of Capital Asset

Eligible Investment

Amount of Exemption

Conditions

Section, Income Tax Act

Individual or Hindu Undivided Family

Residential house

Long-term

New residential house

Minimum of the following:

  • Capital gain, or
  • Cost of new house, or
  • Rupees ten crores.
  • Purchase the new house property within a period of either one year before, or two years after the date of sale of the old house property, or
  • Construct the new house property within a period of three years after the date of sale of the old house property.
Section 82

Individual or Hindu Undivided Family

Land used for agriculture

Both

Agricultural land

Minimum of the following:

  • Capital gain, or
  • Cost of new land.
  • Purchase the new land within a period of two years from the date of sale of old land.
Section 83

Individual or Hindu Undivided Family

Capital assets, other than residential house.

Long-term

New residential house

Minimum of the following:

  • Capital gains, or
  • Capital gains × Cost of new property Sale proceeds of old asset
  • Rupees ten crores
  • The taxpayer shall not own as on the date of sale of capital asset, or purchase within a period of two years from the date of sale of capital asset, or construct within a period of three years from the date of transfer of capital asset, any other residential house.
  • Purchase the new residential house within a period or one year before or two years after the date of sale of the capital asset, or construct the new residential house within a period of three years after the date of sale of capital asset.
Section 86

Any taxpayer

Land and/ or Building

Long-term

Bonds redeemable after 5 years, issued by:

  • National Highways Authority of India
  • Rural Electrification Corporation Limited
  • Power Finance Corporation
  • Indian Railways Finance Corporation
  • Housing and Urban Development Corporation Limited
  • Indian Renewable Energy Development Agency

Minimum of the following:

  • Capital gain, or
  • Amount invested in bonds.
  • Investment shall not exceed Rupees fifty lakhs.
  • Investment in bonds shall be made within a period of six months from that date of sale of land and/ or building.
Section 85

Any taxpayer

Land and building of an Industrial Undertaking, on compulsory acquisition

Both

Land and building for setting up new or shifting the existing Industrial Undertaking

Minimum of the following:

  • Capital gain, or
  • Cost of new land and building.
  • Purchase new land and building within a period of 3 years from the date of compulsory acquisition of old land and building.
Section 84

Any taxpayer

Assets of an Industrial Undertaking in Urban Area

Both

Assets of the Industrial Undertaking shifted to non-urban area.

Minimum of the following:

  • Capital gain, or
  • Cost of new assets, including expenses incurred.
  • Purchase new assets within a period of one year before or three years after the date of transfer of old assets.
Section 87

Any taxpayer

Assets of an Industrial Undertaking in Urban Area

Both

Assets of the Industrial Undertaking shifted to a Special Economic Zone (SEZ).

Minimum of the following:

  • Capital gain, or
  • Cost of new assets, including expenses incurred.
  • Purchase new assets within a period of one year before or three years after the date of transfer of old assets.
Section 88

Capital Gains Account: The investment, other than the investment in bonds specified in Section 85, if cannot be made before the due date of filing Income Tax Return or before the actual date of filing Income Tax Return, whichever is earlier, shall be invested in a Capital Gains Account (a special bank account, governed by the Capital Gains Account Scheme, 1988) opened with an authorised bank branch, to be eligible for exemption.

from

ACP-BI
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