Effective from April 1, 2026, Section 82 of the Income Tax Act, 2025 replaces the former Section 54 from the 1961 Act. To qualify for the full exemption, sellers must purchase a new residential property in India within one year prior or two years after the sale, or construct one within three years. Chartered Accountant Suresh Surana notes that any funds not utilized within the three-year window become taxable once that period expires. Without this relief, long-term capital gains on land or buildings held for more than 24 months are taxed at 12.5% without indexation.
Key points
Individuals and Hindu Undivided Families can completely offset long-term capital gains ta…: Individuals and Hindu Undivided Families can completely offset long-term capital gains tax by purchasing residential property in India.
Unutilized capital gains funds become subject to taxation once the mandatory three-year c…: Unutilized capital gains funds become subject to taxation once the mandatory three-year construction or purchase window officially expires.
Long-term capital gains from real estate held over 24 months face a standard 12.5% tax ra…: Long-term capital gains from real estate held over 24 months face a standard 12.5% tax rate without indexation if not reinvested.
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From April 1, 2026, Tax Year 2026-2027 has started and this means the Income Tax Act, 2025 is applicable and this means you need to familiarise yourself with the newly renumbered Sections to keep your financial plans on track. Previously, under the Income Tax Act, 1961, Section 54 was a well-known term especially for those involved in buying or selling property.
The reason is Section 54 allows you to claim an income tax exemption on the selling a property if you reinvested the long term capital gains from the old property to buy a a new residential property in India.
Section 54 is now renumbered as Section 82 of the Income Tax Act, 2025.
According to Chartered Accountant Suresh Surana, under Section 82 of the Income-tax Act, 2025, if a taxpayer has long-term capital gains (LTCG) from the sale of a residential property, those gains are exempt from tax as long as they are reinvested in acquiring another residential house property in India.
Also, the benefits under Section 82 are subject to a monetary limit, with the maximum amount of…
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