Capital Gains Exemption on Sale of House: Reinvestment Rules under Income Tax Act 2025 (Section 82)

Section 82 of the Income-tax Act, 2025 lets an individual or HUF avoid tax on the long-term capital gain from selling a residential house if the gain is put into a new residential house in India. The new house must be bought one year before or two years after the sale, or built within three years after it. Any gain that is not reinvested is taxed as capital gains under section 67, and the amount you can count is capped at Rs 10 crore.

This guide walks through who qualifies, the time windows, what happens if you cannot buy the new house before filing your return, and how the cost of the new house is adjusted. All figures are from section 82 as amended by the Finance Act, 2026 (effective 1 April 2026). Examples use tax year 2026-27. Last reviewed on 10 November 2026. For how long-term and short-term gains are split, read capital gains under the 2025 Act.

Who can claim the reinvestment exemption under section 82?

Only an individual or a Hindu undivided family (HUF) can claim it (section 82(1)). A company, firm or LLP cannot. The asset sold (the "original asset") must meet three tests:

• it is a building or land appurtenant to a building (land attached to it);
• it is a residential house whose income is chargeable under the head "Income from house property"; and
• the gain on its transfer is a long-term capital gain.

A capital asset is short-term if held for not more than 24 months immediately before transfer (section 2(101)(a)); the period is 12 months for listed securities, UTI units, equity-oriented fund units and zero-coupon bonds (section 2(101)(b)), which does not matter for a house. A long-term capital asset is one that is not short-term (section 2(67)). So a house held for more than 24 months produces a long-term gain. Gains on a house held for 24 months or less do not qualify under section 82.

What is the time limit to buy or build the new house?

The new house (the "new asset") must be one residential house in India. Section 82(1)(b) gives these windows, counted from the date of transfer of the original house:

Action	Window
Purchase before the sale	Within 1 year before the transfer date
Purchase after the sale	Within 2 years after the transfer date
Construction	Within 3 years after the transfer date
Deposit of unspent gain (if not yet invested)	On or before the due date for filing the return under section 263(1)

How is the exemption calculated?

Section 82(1) compares the long-term capital gain with the cost of the new asset:

• Gain is equal to or less than the cost of the new house: no capital gains are charged under section 67 (section 82(1)(ii)).
• Gain is more than the cost of the new house: only the excess is charged under section 67 (section 82(1)(i)).

You do not need to invest the whole sale price. Only the capital gain has to go into the new house.

Worked example 1: gain fully reinvested

Ravi sells a self-owned residential house in August 2026 (tax year 2026-27). Assumptions: long-term capital gain Rs 80,00,000; he buys a new house in January 2027 for Rs 95,00,000.

Step	Figure
Long-term capital gain	Rs 80,00,000
Cost of new house	Rs 95,00,000
Is gain more than cost? (80,00,000 vs 95,00,000)	No
Capital gain charged under section 67	Rs 0
Cost of new house if sold within 3 years (95,00,000 - 80,00,000)	Rs 15,00,000

The last line matters. Under section 82(1)(ii), if Ravi sells the new house within three years of buying it, its cost is treated as Rs 15,00,000, so the earlier exemption comes back as gain (see withdrawal of capital gain exemption).

Worked example 2: only part of the gain is reinvested

Meena sells a house in October 2026. Assumptions: long-term capital gain Rs 1,20,00,000; she buys a flat for Rs 70,00,000 within the window.

Step	Figure
Long-term capital gain	Rs 1,20,00,000
Cost of new house	Rs 70,00,000
Excess charged under section 67 (1,20,00,000 - 70,00,000)	Rs 50,00,000
Cost of new house if sold within 3 years	Nil

The Rs 50,00,000 is taxed in tax year 2026-27 as long-term capital gain. Meena can reduce that only by putting more of the gain into the new house within the time limits, or by depositing the unspent part under section 82(2) by the return due date (see below).

What if I have not bought the new house before the return due date?

You must park the unspent gain in a deposit. Section 82(2) says that if the gain has not been used to buy the new house before the transfer date, or has not been used for buying or constructing it before you file your return under section 263, then:

• the unused amount must be deposited in a specified bank or institution and utilised as per the scheme notified by the Central Government;
• the deposit must be made before filing the return and not later than the due date under section 263(1); and
• the proof of deposit must be submitted with the return.

For most individuals without business income, the due date under section 263(1)(c), Table Sl. No. 4, is 31 July after the tax year. It is 31 August for an assessee with non-audited business or professional income (Sl. No. 3) and 31 October for those whose accounts are required to be audited (Sl. No. 2). The notified scheme itself is not in the Act text. Check the current scheme and the bank before you deposit.

The amount already spent on the new house plus the amount deposited is treated as the cost of the new house for working out the exemption (section 82(3)).

What happens to deposited money that is not used?

If the deposit is not fully used to buy or construct the new house within the period in section 82(1), the unused amount is charged to tax under section 67 as income of the tax year in which three years from the date of transfer of the original house expire (section 82(4)(a)). You can then withdraw the unused amount under the scheme (section 82(4)(b)).

Worked example 3: deposit, part use and a tax bill later

Meena's neighbour Suresh sells a house on 10 September 2026 (tax year 2026-27). Assumptions: long-term capital gain Rs 60,00,000; by the return due date he has spent Rs 25,00,000 on constructing a new house; he deposits the remaining Rs 35,00,000 under the scheme; by 10 September 2029 he spends Rs 20,00,000 more from the deposit.

Step	Figure
Long-term capital gain	Rs 60,00,000
Already spent by return date	Rs 25,00,000
Deposited under section 82(2)	Rs 35,00,000
Used from deposit within the period	Rs 20,00,000
Unused deposit (35,00,000 - 20,00,000)	Rs 15,00,000
Taxed under section 67 in tax year 2029-30 (year in which 10 September 2029 falls)	Rs 15,00,000
Cost of new house (25,00,000 + 20,00,000), exempt portion	Rs 45,00,000

Suresh can withdraw the unused Rs 15,00,000 from the scheme account to pay that tax (section 82(4)(b)).

Can I buy two houses instead of one?

Yes, once. Section 82(5) allows two residential houses in India as the new asset if the capital gain does not exceed Rs 2 crore, and you choose this option. The "one house" wording in sections 82(1)(b) and 82(2) is then read as "two houses". Section 82(6) says that once you use this option, you cannot use it in the same tax year or any other tax year.

Real-life example. Anita sells her flat in tax year 2026-27 with a long-term gain of Rs 1,80,00,000 (Rs 1.8 crore). She buys two flats for Rs 1,00,00,000 and Rs 1,10,00,000 within the window and opts for two houses. Total cost is Rs 2,10,00,000, which is more than her gain, so no capital gains are charged. She has now used the one-time option under section 82(6) and cannot use it again for any future sale.

Can an NRI or a person with more than one house claim section 82?

Section 82(1) is open to "an individual or Hindu undivided family" and the text sets no condition on residential status, so a non-resident individual who meets the other tests can use it. What matters is where the new house is: it must be in India (section 82(1)(b)). The section also does not limit how many other houses you already own; it only counts the one new house (or two under the option below) bought or built within the windows.

On the two-house option, the test is that the gain "does not exceed" Rs 2 crore (section 82(5)), so a gain of exactly Rs 2,00,00,000 still qualifies. If you choose two houses, both are the "new asset" for the deposit rule in section 82(2) as well, so the unspent gain can be deposited once for the pair (section 82(5)(b)).

Is there a cap on the amount that counts?

Yes. Two limits of Rs 10 crore apply:

Limit	Rule	Section
Cost of new house	Cost above Rs 10 crore is ignored when working out the exemption	82(7)
Capital gain for deposit purposes	Gain above Rs 10 crore is ignored for the deposit rule in 82(2)	82(8)
Two-house option	Available only if gain is Rs 2 crore or less; usable once	82(5), 82(6)

For example, if the gain is Rs 12,00,00,000 and the new house costs Rs 15,00,00,000, only Rs 10,00,00,000 of the cost counts under section 82(7). The gain exceeds that by Rs 2,00,00,000, and that excess is charged under section 67.

Real-life example: when the exemption does not apply

Kiran sells a house he held for 18 months. The gain is short-term (24 months or less), so section 82 does not apply however much he reinvests. In another case, a private company sells a residential property and buys a new one. Section 82 is limited to individuals and HUFs, so the company cannot use it.

The Rs 10 crore figures are applied separately. Take a gain of Rs 12,00,00,000 that is not yet reinvested by the return due date: only Rs 10,00,00,000 of it is counted for the deposit rule (section 82(8)), because the amount above Rs 10 crore is ignored there.

Do I still need to file a return if the whole gain is exempt?

Possibly. Section 263(1)(a)(iii) tests the filing requirement on total income computed without giving effect to deductions allowable under section 82 (and sections 83 to 88). So if your income before section 82 relief exceeds the maximum amount not chargeable to tax, you have to file, and the deposit proof under section 82(2)(c) goes with that return.

What are the common mistakes?

• Missing the deposit. If the new house is not ready by the return due date and the gain is not deposited by then, the exemption on the unspent portion is at risk.
• Filing late. The deposit must be made on or before the due date under section 263(1), so a delayed return is also a delayed deposit.
• Treating a short-term gain as eligible. Check the holding period first (section 2(101)).
• Buying two houses when the gain is above Rs 2 crore, or using the two-house option twice.
• Selling the new house within three years. Its cost is reduced by the gain (or becomes nil), so the earlier exemption is reversed.
• Forgetting to attach proof of deposit to the return (section 82(2)(c)).

Quick reference

Point	Position under section 82
Who	Individual or HUF
Original asset	Residential house (income under house property), long-term gain
New asset	One residential house in India (two if gain is up to Rs 2 crore, once)
Purchase window	1 year before to 2 years after the sale
Construction window	3 years after the sale
Deposit	Unspent gain, by return due date under section 263(1)
Cap	Rs 10 crore on cost of new house and on gain for the deposit rule
Lock-in	Sale of new house within 3 years: cost reduced by the gain, or nil

Where is this in the Act?

• Section 82(1): conditions, windows, calculation
• Section 82(2) and (3): deposit and cost of new asset
• Section 82(4): unused deposit taxed after three years
• Section 82(5) and (6): two-house option
• Section 82(7) and (8): Rs 10 crore caps
• Section 67: charging section for capital gains
• Section 263(1): return and due dates; section 2(101): short-term capital asset

For a CA firm, the hard part is tracking each client's sale date, the three windows, the deposit and the three-year anniversary, often across several tax years. Finexo's practice management software keeps these dates against each client so they are reminded before they pass. It does not compute capital gains or file returns for you.

This article explains section 82 of the Income-tax Act, 2025 (as amended by the Finance Act, 2026). It is general information, not tax advice. Confirm the position for a specific case with a qualified chartered accountant.