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When you sell a residential property held for more than 24 months, the profit is categorized as Long-Term Capital Gains (LTCG). Under Section 54 of the Income Tax Act 1961, individuals and HUFs can achieve 100% tax exemption by reinvesting into residential property. ### 1. Statutory Reinvestment Timelines Under Section 54 To claim full exemption on capital gains: * **Purchase:** Buy another residential house within **1 year before** or **2 years after** the sale date. * **Construction:** Construct a new residential house within **3 years** from the date of transfer. ### 2. The Capital Gains Account Scheme (CGAS 1988) If the due date for filing your income tax return (July 31) arrives before you have finalized your new property purchase, you must deposit the unutilized capital gains into a designated **Capital Gains Account Scheme (Type A savings or Type B term deposit)** with an authorized public sector bank. Depositing into regular savings accounts invalidates your Section 54 exemption claim. ### 3. Lock-in Period for the New Asset The newly acquired residential property cannot be sold or transferred within **3 years** of acquisition. Breaching this lock-in revokes the prior tax exemption, and gains will be treated as short-term capital gains in the year of secondary sale.

Section 54 & 54F Capital Gains Tax Exemptions: How to Legally Save Tax on Property Sale

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