When you sell a capital asset—such as property, land, shares, or business assets—the profit is taxed as capital gains. However, the Income-tax Act provides multiple exemptions that allow taxpayers to save tax if the sale proceeds or capital gains are reinvested in specified assets.
These tax-saving exemptions apply to investments in house property, agricultural land, industrial undertakings, specified bonds, SEZ relocation, and eligible start-ups. Let’s break them down section-wise in a clear, simple manner.
Available to: Individuals and HUFs
Applies to: Long-term capital gains from sale of a house
You can save tax if the capital gains are invested in one residential property in India, subject to these conditions:
Buy: within 1 year before or 2 years after sale
Construct: within 3 years after sale
Exemption allowed for only 1 property
However, 2 properties can be claimed if capital gains do not exceed ₹2 crore (once in a lifetime)
Max exemption capped at ₹10 crore
If money is not used before return filing due date, deposit in CGAS to claim exemption.
New house sold within 3 years
CGAS amount not utilised within 2/3 years
Available to: Individuals and HUFs
Applies to: Short-term and long-term capital gains
Conditions:
Land must have been used for agriculture for at least 2 years by taxpayer, parents, or HUF.
Gains must be invested in new agricultural land within 2 years.
CGAS can be used if funds are not immediately utilised.
New land sold within 3 years
CGAS amount not used within 2 years
Available to: All taxpayers
Exemption applies when an industrial land/building is compulsorily acquired and proceeds are reinvested to:
purchase land/building, or
construct building for shifting or re-establishing the industry
Timeline: 3 years
CGAS allowed.
New asset sold within 3 years
CGAS amount unutilised within 3 years
Available to: All taxpayers
Applies to: Long-term capital gains from land/building
Invest in bonds of:
NHAI
REC
HUDCO (as notified)
Invest within 6 months
Max investment: ₹50 lakh
Lock-in: 5 years
Sale or conversion of bonds within 5 years → exemption reversed
Available to: All taxpayers
Max exemption: ₹50 lakh
Investment window: within 6 months of transfer
Sold or converted into money within 3 years
Available to: Individuals & HUFs
Applies to: long-term capital gains on any asset other than residential house
Invest entire net consideration in one house in India
Buy: within 1 year before / 2 years after
Construct: within 3 years
Cannot already own more than 1 house on date of transfer
Max exemption limited to ₹10 crore
Exemption = Investment × Capital Gains / Net Consideration
Buy another house within 2 years or construct within 3 years
New house sold within 3 years
CGAS amount unutilised within 3 years
Available to: All taxpayers
Exemption applies when industrial land/building/machinery is sold for relocation.
Investment allowed for:
purchase of land/building
machinery
shifting expenses
Timeline: 1 year before / 3 years after
CGAS deposits allowed.
New asset sold within 3 years
CGAS amount not utilised within 3 years
Similar to Section 54G but specifically applies when shifting from urban area to SEZ.
All conditions, utilisation rules & withdrawal triggers are same as Section 54G.
Available to: Individuals & HUFs
Exemption when sale proceeds of house/plot are invested in equity shares of:
an eligible MSME company, or
eligible startup
The company must use the funds to purchase new plant & machinery within 1 year.
Assessee must hold ≥25% share capital/voting rights
Startup must be incorporated within prescribed dates
If company doesn’t utilise funds → deposit in CGAS
Exemption = Investment in new asset × Capital Gains / Net Sale Consideration
Shares sold within 5 years
Machinery sold within 5 years (3 years for computers/software)
Funds not utilised within 1 year → exemption reversed
The Indian income-tax law provides multiple reliefs to encourage taxpayers to reinvest capital gains in productive assets — housing, agriculture, industry, and startups.
Taxpayers can reduce or eliminate capital gains tax if they plan investments correctly and comply with timelines.
These provisions not only reduce tax burden but also help channel funds into sectors that boost economic development.
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