Section 82
Section 82: profit on sale of property used for residence
Section 82 is the reinvestment exemption for long-term capital gains from selling a residential house - the successor to Section 54 of the old Act. An individual or HUF can avoid tax on the gain by buying or constructing a new residential house within specified time windows, subject to a deposit scheme for unutilised amounts and caps introduced for high-value transactions.
This explanation is AI-assisted and pending review by our CA/CS team. It is general information, not professional advice - always cross-check against the bare law text above or talk to our tax team for guidance specific to your situation.
Who qualifies and the basic mechanism
Section 82(1) applies where an individual or HUF has long-term capital gains from transferring a residential house (or land appurtenant to it) whose income is chargeable under "Income from house property" (the "original asset"), and the assessee has purchased a new residential house in India within one year before or two years after the transfer, or constructed one within three years after the transfer (the "new asset"). In that case:
- If the capital gains exceed the cost of the new asset, the excess is taxed under Section 67, and the cost of the new asset is treated as nil for computing gains if it is sold within three years of purchase/construction.
- If the capital gains are equal to or less than the cost of the new asset, no capital gains are taxed, and the cost of the new asset is reduced by the amount of the capital gains for computing gains if it is sold within three years of purchase/construction.
The deposit scheme for unutilised gains
If the capital gains are not used to purchase the new asset before the transfer date, or not utilised for purchase/construction before the assessee files the return of income under Section 263, Section 82(2) requires the unutilised amount to be deposited in a specified bank/institution under the Central Government's notified scheme, before the return-filing due date under Section 263(1), with proof of deposit submitted along with the return.
Section 82(3) treats the amount already utilised for the new asset, plus the amount deposited, as the cost of the new asset (subject to the ₹10 crore cap in Section 82(7)).
If the deposited amount is not fully utilised within the time limits in Section 82(1), Section 82(4) taxes the unutilised balance under Section 67 as income of the year the three-year period from the original transfer expires, and the assessee can withdraw the unutilised amount as per the deposit scheme.
Option to buy two houses
Section 82(5) allows the assessee, if the capital gains do not exceed ₹2 crore, to opt to purchase or construct two residential houses in India instead of one - in which case references to "one residential house" and "new asset" are read as "two residential houses." Section 82(6) restricts this two-house option to being exercised only once - if used in a tax year, it cannot be exercised again in that year or any other tax year.
Caps on cost of new asset and on capital gains
| Cap | Effect |
|---|---|
| Cost of the new asset exceeds ₹10 crore | The amount exceeding ₹10 crore is ignored for Section 82(1) (Section 82(7)) |
| Capital gains on the original asset exceed ₹10 crore | The amount exceeding ₹10 crore is ignored for Section 82(2) (Section 82(8)) |
Frequently asked questions
What is the time window to buy or build a new house to claim this exemption?
Purchase within one year before or two years after the transfer of the original house, or construction within three years after the transfer, per Section 82(1)(b).
Can I buy two houses instead of one and still claim the exemption?
Yes, but only if the capital gains do not exceed ₹2 crore, and this two-house option can be exercised only once in a lifetime (not repeated in the same or any other tax year), per Section 82(5) and (6).
What if I don't reinvest the gains before filing my return?
You must deposit the unutilised amount in a specified bank/institution under the notified Capital Gains Account Scheme before the return filing due date, and submit proof of deposit with the return, per Section 82(2).
Is there a monetary cap on this exemption for very large transactions?
Yes - amounts of the new asset's cost above ₹10 crore, and capital gains above ₹10 crore, are excluded from the exemption computation under Section 82(7) and (8).
Related sections
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Get expert help claiming your residential house capital gains exemptionLast updated 9 September 2026