Capital Gains Exemption - List of Exemptions
When you sell a big asset like a house or an old plot of land, the tax bill can feel like a heavy burden. But here is a secret: the Indian government doesn't actually want to take all your profit if you are planning to reinvest that money back into the country’s growth. To encourage you to keep your money moving, the Income Tax Act provides special Exemptions.
Think of these exemptions as a Tax-Free Pass. If you use the money from your sale to buy a new home, invest in specific government bonds, or even fund a startup, the government says, Okay, since you are putting this money back into an asset, we won't charge you tax on it today. For 2026, while the tax rates have become simpler at 12.5%, knowing these exit gates is the best way to ensure your hard-earned wealth stays with you and your family.
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The Master List of Capital Gains Exemptions (2026)
In India, different Sections apply depending on what you sold and what you are buying next. Here is a summary of the most popular ways to save tax:
Section
What did you sell?
What should you buy?
Max Limit / Condition
Residential House
Another Residential House
Up to ₹10 Crore gain
Section 54F
Any asset (Gold, Plot, etc.)
A Residential House
Up to ₹10 Crore reinvestment
Section 54EC
Land or Building
Specified Bonds (NHAI/REC)
₹50 Lakhs per year
Section 54B
Agricultural Land
New Agricultural Land
Cost of the new land
Section 54GB
Residential Property
Equity in an Eligible Startup
Must hold > 25% shares
1. Saving Tax on House Sale (Section 54)
This is the most common exemption. If you sell your home, you don't pay tax if you buy a new one.
- The Rule: You must buy a new house 1 year before or 2 years after the sale. If you are building a house, you have 3 years.
- Special 2026 Note: You can buy two houses with your profit if your total capital gain is below ₹2 Crores. This is a once-in-a-lifetime opportunity.
- The Cap: The maximum exemption you can claim under this section is now capped at ₹10 Crores.
2. Selling Plots or Gold to Buy a Home (Section 54F)
If you sell anything other than a house (like gold, diamonds, or a vacant plot of land) and use that money to buy a house, you can save tax.
The Catch: Unlike Section 54, here you must invest the entire sale amount (net consideration), not just the profit, to get a full exemption.
Formula:
Exemption = Capital Gain × (Amount Invested ÷ Net Sale Consideration)
3. The Bond Option (Section 54EC)
If you don't want to buy another property, you can invest in Capital Gain Bonds.
- Eligible Bonds: NHAI, REC, PFC, and IRFC.
- Timeline: You must invest within 6 months of selling your property.
- Lock-in: You cannot sell these bonds or take a loan against them for 5 years.
- Limit: You can only invest up to ₹50 Lakhs in these bonds in a single financial year.
The Capital Gains Account Scheme (CGAS)
What if the deadline to buy a new house is approaching, but you haven't found the right home yet?
Don't worry. Before you file your Income Tax Return (usually July or September), you can deposit your profit into a Capital Gains Account in any nationalized bank. The government will treat this as if you've already bought a house, and you won't have to pay tax that year. You then have 2 to 3 years to actually spend that money on your new home.