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Quick Snapshot: Understand This in 2 Minutes
Imagine you sold your flat in Mumbai for Rs. 1.2 crore. You paid Rs. 40 lakh for it years ago. Your capital gain is Rs. 80 lakh. That gain is taxable. But if you take that Rs. 80 lakh and buy another house with it, the government steps back and says: no tax.
That is Section 82 in plain words.
Think of it like this. You are holding a hot potato (the capital gain). If you pass it quickly to a new house, you are safe. If you keep holding it, you pay tax
| Parameter | Details |
| Who can claim | Individual or HUF only |
| Asset sold | Residential house (long-term capital asset) |
| Reinvest in | 1 new residential house in India (or 2 if gain is within Rs. 2 crore) |
| Purchase deadline | 1 year before OR 2 years after the date of sale |
| Construction deadline | 3 years after the date of sale |
| Cap on exemption | Rs. 10 crore maximum |
| Lock-in period | 3 years from purchase/construction |
| Corresponding old section | Section 54 of the Income Tax Act 1961 |
Who Can Use Section 82?
Only an individual or a Hindu Undivided Family (HUF) can claim this exemption. Companies, firms, LLPs, and trusts do not qualify under this section.
The asset sold must be a residential house that qualifies as a long-term capital asset. Under the Income Tax Act 2025, a property held for more than 24 months before sale is long-term.
What Must You Reinvest In?
You must buy or construct one new residential house in India. That house must be:
- Purchased within 1 year before the date of sale, or within 2 years after the date of sale.
- Constructed within 3 years after the date of sale.
Key Point: Year Before the Sale Counts
If you bought a new house within 1 year before selling the old one, that purchase still qualifies. For example, you bought a flat in January 2025 and sold your old house in August 2025. The new flat counts for Section 82 exemption.
How Much Exemption Do You Get?
The exemption equals the lower of:
- the capital gain on the original house, or
- the cost of the new house.
| Situation | Exemption |
| Cost of new house is more than the capital gain | Entire capital gain is exempt |
| Cost of new house is less than the capital gain | Only the cost of the new house is exempt; balance is taxable |
Example 1: Full Exemption
Ramesh sells his Delhi flat. Capital gain = Rs. 80 lakh. He buys a Noida flat for Rs. 90 lakh within 18 months. Since Rs. 90 lakh exceeds the gain of Rs. 80 lakh, the entire Rs. 80 lakh is exempt. Tax = Rs. 0.
Example 2: Partial Exemption
Kavita sells her Bengaluru house. Capital gain = Rs. 60 lakh. She buys a new flat for Rs. 45 lakh within 2 years. Exemption = Rs. 45 lakh. Taxable LTCG = Rs. 15 lakh.
The Two-House Option (Section 82(5) and 82(6))
Normally, you can claim exemption for only one new house. Section 82(5) creates a special option: if your capital gain is Rs. 2 crore or less, you may invest in two residential houses instead of one.
Conditions for the two-house option:
- The capital gain must not exceed Rs. 2 crore.
- You can exercise this option only once in your lifetime. (Section 82(6))
- Both houses must be in India.
Example 3: Two-House Option
Sunita sells her house. Capital gain = Rs. 1.5 crore (within Rs. 2 crore). She exercises the two-house option and buys two flats: one for Rs. 60 lakh and another for Rs. 80 lakh. Total investment = Rs. 1.4 crore. Exempt = Rs. 1.4 crore. Taxable LTCG = Rs. 10 lakh.
The Rs. 10 Crore Cap (Sections 82(7) and 82(8))
Starting from the Finance Act 2023, there is a ceiling on how much exemption you can claim under this section. This rule continues in the 2025 Act.
- Section 82(7): If the cost of the new house exceeds Rs. 10 crore, only Rs. 10 crore is considered for computing the exemption.
- Section 82(8): If the capital gain itself exceeds Rs. 10 crore, only Rs. 10 crore is considered for the CGAS deposit.
What This Means in Practice
No matter how much you invest in the new house, the maximum exemption you can claim is Rs. 10 crore. Capital gains above Rs. 10 crore are always taxable, regardless of reinvestment.
Example 4: Rs. 10 Crore Cap in Action
Arjun sells a luxury property. Capital gain = Rs. 18 crore. He buys a new house for Rs. 20 crore. Cap applies: only Rs. 10 crore counts as investment. Exemption = Rs. 10 crore. Taxable LTCG = Rs. 8 crore.
What Happens If You Sell the New House Within 3 Years?
The exemption is withdrawn. If you sell the new house within 3 years of purchasing or constructing it, the capital gain that was exempt earlier becomes taxable as long-term capital gains in the year of that sale. This is the lock-in condition.
Two Adjacent Flats: One or Two Houses?
Under Section 82, if you purchase two adjacent flats and combine them into a single unit, they are treated as one residential house. The exemption applies to the combined cost.
Can You Invest in Someone Else’s Name?
Yes. Investment in the name of another person also qualifies, provided all other conditions are met and the investment is traceable to the capital gain proceeds.
The Capital Gain Account Scheme (CGAS): Your Safety Net
Sometimes the sale happens but you have not found the right property yet. Filing your income tax return is due. What do you do?
You deposit the unused capital gain in a Capital Gain Account Scheme (CGAS) account with a designated bank before filing your return. This protects your exemption claim.
- The deposit counts as the cost of the new house for exemption purposes.
- You must use the deposited amount to purchase or construct the new house within the time limit (2 years for purchase, 3 years for construction).
- If you do not use the deposited amount within the time limit, it becomes taxable as capital gains in the year the time limit expires.
CGAS Example
Arun sells his house in April 2026. Capital gain = Rs. 90 lakh. He has not found a new house by July 2026 (ITR filing date). He deposits Rs. 90 lakh in CGAS before filing. He has until April 2028 to buy a house. If he buys within this time using the CGAS funds, the full Rs. 90 lakh remains exempt.
Practical Compliance Checklist
- Sold your house? First check whether you are an individual or HUF. Companies do not qualify.
- Hold the sale proceeds and calculate the capital gain before spending anything.
- If your capital gain is within Rs. 2 crore and you need two houses, plan now. You get this option only once in a lifetime.
- Buy or book a new house within 2 years. If constructing, complete within 3 years. Mark these dates in your calendar.
- If the ITR deadline arrives before you have invested fully, deposit the unused gain in CGAS immediately.
- Do not sell the new house within 3 years. The exemption reverses if you do.
- If your capital gain exceeds Rs. 10 crore, accept that the excess is taxable. No exemption applies beyond Rs. 10 crore.
Section 82 is one of the most commonly used capital gains exemptions in India. The law is genuinely generous: reinvest the gain in a new house within the given time, and you pay no tax. The two-house option is a bonus for those with gains below Rs. 2 crore. The Rs. 10 crore cap ensures that the very wealthy do not escape tax entirely. If you plan the reinvestment well and use CGAS where needed, Section 82 can turn a large tax bill into zero.
