Section 54 exemption not allowed for land purchase only.
Construction must complete within three years from sale date.
Exemption claimable multiple times; two houses once lifetime.
Exemption Under Section 54 Of Income-Tax Act, 1961 Not Available For Purchase Of Land
Unutilised LTCG arising from sale of house has to be deposited in a bank account under the Capital Gains Account Scheme. You can claim exemption under Section 54 for more than one residential property during the same financial year
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I sold an apartment in October 2025. Can I claim exemption under Section 54 of the Income-tax Act, 1961 if I buy a plot of land?
Section 54 of the Income-tax Act, 1961 provides for exemption to an individual and a Hindu Undivided Family (HUF) from long-term capital gains (LTCG) tax arising from sale of a residential house property if such LTCG is invested for acquiring another residential house property within the time prescribed period.
The investment can be made in a ready-to-move-in house or it can be claimed if the taxpayer goes for self-construction on a plot of land owned by him. Booking an under-construction flat with a developer is also considered as construction for this purpose.
So, if you are buying a plot of land to construct a residential house on it, the construction needs to get completed within a period of three years from the date of sale of the residential house. If the LTCG are not fully utilised for the stated purpose by the due date of filing of the income tax return (ITR), the unutilised LTCG has to be deposited in a bank account under the Capital Gains Account Scheme. The money so deposited can be utilised for acquiring a residential house property within the prescribed time period.
Do note that no exemption is available for mere purchase of a land unless a residential house is constructed on it within the prescribed time period.
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Section 54 of the Income-tax Act, 1961 provides that one can avail of exemption in respect of two residential houses only once in a lifetime. However, there is no such limit in respect of one residential house? So does it mean that one can avail of such exemption in respect of one residential house a number of times in a lifetime?
Section 54 of the Income-tax Act, 1961 provides for exemption from LTCG arising from sale of a residential house property if the amount of LTCG is utilised for acquiring another residential house property in India within a prescribed time period.
The law also provides for once in a lifetime exemption to be available from LTCG arising from sale of one residential house for acquiring two residential house properties in India if the amount of LTCG does not exceed Rs 2 crore. Except for this restriction of once in a lifetime opportunity to invest LTCG from one residential house property into two residential houses, there are no restrictions as regards claiming exemption as long as such LTCG is utilised for acquiring another residential house property. You can claim exemption under Section 54 for more than one residential property during the same financial year.
There are no restrictions on the number of times you can claim this exemption during your lifetime or during one financial year.
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The author is a tax and investment expert and can be reached on jainbalwant@gmail.com
(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)
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