Section 82 — Residential House Reinvestment Exemption | ITA 2025

Section 82 — - RESIDENTIAL HOUSE → RESIDENTIAL HOUSE REINVESTMENT EXEMPTION

Section 82 is the substantive equivalent of 1961 s. 54 -- THE MOST-UTILISED reinvestment exemption in individual / HUF capital-gains planning. The provision allows individuals / HUFs selling LTCG-eligible residential house property to roll-over the gain into another residential house (or two houses where LTCG <= INR 2 cr, once in a lifetime, FA 2019) and escape the LTCG charge to extent of reinvestment, subject to FA 2024 absolute cap of INR 10 crore on (a) cost of new asset deductible AND (b) capital gain eligible for CGAS deposit. EIGHT sub-sections work together: (1) basic eligibility / 1-year-before / 2-year-after-purchase / 3-year-construction window with claw-back rule; (2) CGAS deposit mechanism; (3) deemed-cost-of-new-asset for utilised + deposited amounts; (4) c/f utilisation failure -> charge in expiry year; (5) FA 2019 TWO HOUSES option for LTCG <= INR 2 cr; (6) once-in-a-lifetime restriction on two-house option; (7) FA 2024 INR 10 cr cap on cost of new asset; (8) FA 2024 INR 10 cr cap on CG amount for sub-s. (2) deposit. Practitioner-grade rule: this is the bread-and-butter exemption for HNW individuals selling residential property; FA 2024 has SUBSTANTIALLY restricted the benefit -- gains > INR 10 cr remain taxable at 12.5% / 20%-with-indexation.

Statutory text — Income-tax Act, 2025

Marginal note -- Profit on sale of property used for residence

(1) Where an individual or Hindu undivided family—

(a) has long-term capital gains arising from the transfer of a capital asset, being buildings or lands appurtenant thereto, and being a residential house, the income of which is chargeable under the head “Income from house property” (original asset); and

(b) has within one year before or two years after the date of such transfer purchased, or has within three years after that date constructed, one residential house in India (new asset), then, instead of the capital gain being charged to income-tax as income of the tax year in which the transfer took place, it shall be dealt with as follows:—

(i) if the capital gains exceeds the cost of the new asset, such excess shall be charged under section 67, and for computing capital gains arising from the transfer of the new asset within three years of its purchase or construction, the cost shall be nil; or

(ii) if the capital gains is equal to or less than the cost of the new asset, no capital gains shall be charged under section 67 and for computing capital gains from the transfer of the new asset within three years of its purchase or construction, the cost shall be reduced by the amount of the capital gains.

(2) If the capital gains referred to in sub-section (1) is not used by the assessee to purchase the new asset within one year before the date of transfer of the original asset, or is not utilised for the purchase or construction of the new asset before filing the return of income under section 263, then—

(a) the unutilised amount shall be deposited in a specified bank or institution and utilised as per the scheme notified by the Central Government;

(b) such deposit shall be made before the filing of the return and not later than the due date applicable in the case of the assessee for filing the return of income under section 263(1); and

(c) the proof of deposit shall be submitted along with such return.

(3) For the purposes of sub-section (1), the amount, already utilised for purchasing or constructing the new asset, together with the deposited amount under sub-sec- tion (2) shall, subject to sub-section (7), be deemed to be the cost of the new asset.

(4) If the amount deposited under sub-section (2) is not fully utilised for purchasing or constructing the new asset within the period specified in sub-section (1), then,—

(a) the unutilised amount shall be charged to tax under section 67 as the income of the tax year in which the period of three years from the date of the transfer of the original asset expires; and

(b) the assessee shall be entitled to withdraw such unutilised amount in accordance with the scheme referred to in sub-section (2).

(5) If the capital gains under sub-section (1) does not exceed two crore rupees, the assessee may, at his option, purchase or construct two residential houses in India, and where such option has been exercised,—

(a) for the purposes of sub-section (1)(b), “one residential house in India” shall be read as “two residential houses in India”; and

(b) for the purposes of sub-sections (1)(b) and (2), “new asset” shall mean two residential houses in India.

(6) If during any tax year, the assessee has exercised the option mentioned in sub-section (5), he shall not be entitled to exercise such option for the same tax year or any other tax year.

(7) If the cost of new asset exceeds ten crore rupees, the amount exceeding ten crore rupees shall not be taken into account for the purposes of sub-section (1).

(8) If the capital gains on the transfer of original asset exceeds ten crore rupees, the amount exceeding ten crore rupees shall not be taken into account for the purposes of sub-section (2).

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 -- s. 82	INCOME-TAX ACT, 1961 -- s. 54
s. 82(1)(a) -- LTCG on residential house (HP-chargeable; original asset)	1961 s. 54(1)
s. 82(1)(b) -- Reinvestment in 1 residential house in India: 1y before / 2y after purchase OR 3y construction	1961 s. 54(1)
s. 82(1)(i) -- Excess CG over cost = chargeable; new asset cost = NIL for 3-year claw-back	1961 s. 54(1) Proviso
s. 82(1)(ii) -- CG <= cost = no charge; new asset cost reduced by exempt CG	1961 s. 54(1)
s. 82(2) -- CGAS deposit pre s. 263 due date (1988 Scheme)	1961 s. 54(2) read with CGAS 1988
s. 82(3) -- Utilised + deposited amount = deemed cost of new asset	1961 s. 54(3)
s. 82(4) -- Unutilised CGAS at 3-year expiry = LTCG in expiry year + withdrawal entitlement	1961 s. 54(2) Proviso
s. 82(5)-(6) -- TWO houses option (FA 2019; LTCG <= INR 2 cr; once-in-lifetime)	1961 s. 54(1) Proviso 2 [FA 2019]
s. 82(7) -- FA 2024 INR 10 crore cap on COST OF NEW ASSET	1961 s. 54 Proviso (FA 2024)
s. 82(8) -- FA 2024 INR 10 crore cap on CAPITAL GAIN for CGAS deposit	1961 s. 54 Proviso (FA 2024)

STATUTORY ARCHITECTURE

ELIGIBILITY (sub-s. 1): (a) ASSESSEE: INDIVIDUAL or HUF only -- companies / firms / LLPs / AOPs / BOIs / NRs (treated as individual where resident) NOT eligible. (b) ORIGINAL ASSET: capital asset being BUILDINGS or LANDS APPURTENANT THERETO, being a residential house, the income of which is chargeable under HP head (s. 20 / 1961 s. 22). Self-occupied / let-out both qualify. Commercial property / godown / office NOT eligible (this is s. 87 / 1961 s. 54G territory). (c) HOLDING PERIOD: must be LONG-TERM. Post FA 2017 / 1961 s. 2(42A) Proviso -- IMMOVABLE PROPERTY held > 24 MONTHS qualifies as long-term (reduced from 36 months). Practical implication: residential house held 24+ months = LTCG; eligible for s. 82. (d) REINVESTMENT WINDOW: (i) PURCHASE: 1 YEAR BEFORE the date of transfer of original asset OR 2 YEARS AFTER. So earliest legitimate purchase: original-transfer-date minus 365 days. (ii) CONSTRUCTION: 3 YEARS AFTER date of transfer of original asset. Construction-completion (occupancy / completion certificate) within 3-year window required. (e) NEW ASSET: ONE residential house IN INDIA (sub-s. 5 expansion to TWO houses for LTCG <= INR 2 cr, once-in-lifetime). EXEMPTION MECHANICS (sub-s. 1(i)/(ii)): (i) If LTCG > cost of new asset: EXCESS chargeable u/s 67; new asset cost set to NIL for 3-year claw-back computation; (ii) If LTCG <= cost of new asset: NO LTCG charged; new asset cost reduced by exempt-LTCG amount for 3-year claw-back computation. Effectively new-asset-cost reduction creates a deferred tax liability triggered if new asset is sold within 3 years of acquisition / construction.

SUB-SECTION (2) -- CGAS DEPOSIT MECHANISM

Where the assessee has not utilised LTCG funds for purchase / construction BEFORE FILING return of income u/s 263 (typically 31-Jul / 31-Oct depending on audit status), the unutilised amount must be DEPOSITED in Capital Gains Account Scheme, 1988 (CGAS-88) under the prescribed scheme. MECHANICS: (a) Deposit before s. 263(1) due date for the year of original transfer; (b) Deposit must be in DESIGNATED account (typically SBI / PSU bank specially-marked CGAS account); (c) Two account types under CGAS: Type-A (savings-like, immediate withdrawal) and Type-B (term-deposit-like, planned utilisation); (d) Proof of deposit MUST be SUBMITTED with return; (e) Withdrawal only for prescribed purchase / construction; alternative withdrawal triggers tax. DEEMED COST (sub-s. 3): the AMOUNT ALREADY UTILISED for purchase / construction BEFORE return-filing PLUS the CGAS-DEPOSITED AMOUNT collectively = DEEMED COST OF NEW ASSET (subject to FA 2024 INR 10 cr cap). This permits exemption claim despite incomplete acquisition at return-filing date. Practitioner workflow: (i) compute LTCG; (ii) determine reinvestment status pre-due-date; (iii) deposit shortfall in CGAS before due date; (iv) submit return with CGAS deposit proof; (v) utilise within 2-year purchase / 3-year construction window; (vi) maintain utilisation evidence.

SUB-SECTION (4) -- UTILISATION FAILURE / EXPIRY

If CGAS-deposited amount is NOT FULLY UTILISED within the 2-year purchase / 3-year construction window: (a) UNUTILISED AMOUNT is CHARGED TO TAX as LTCG in the tax year in which the 3-YEAR period from original-transfer expires. NOT in the original-transfer year (which would create retroactive cascading); chargeable in expiry year as fresh LTCG event. (b) Assessee ENTITLED TO WITHDRAW unutilised amount per CGAS scheme post-expiry. Effectively: tax-deferral up to 3 years; if utilisation fails, full LTCG charge but only in expiry year. Practitioner: monitor utilisation closely; document CGAS withdrawals and their application to qualifying purchase / construction. Common failure scenarios: (i) construction project delayed beyond 3 years; (ii) chosen property fell through; (iii) developer default; (iv) personal financial constraints requiring withdrawal.

SUB-SECTIONS (5)-(6) -- FA 2019 TWO-HOUSES OPTION

FA 2019 introduced a relaxation for moderate-LTCG cases. Where LTCG (under sub-s. 1) does NOT EXCEED INR 2 CRORE, assessee MAY OPT to purchase / construct TWO RESIDENTIAL HOUSES IN INDIA. MECHANICS: (i) Sub-s. (5)(a) reads 'one residential house in India' as 'two residential houses in India' for sub-s. (1)(b); (ii) Sub-s. (5)(b) reads 'new asset' as 'two residential houses in India' for sub-ss. (1)(b) and (2). Effectively all of sub-s. (1) and (2) machinery applies but the new asset is two houses jointly. Reinvestment (purchase or construction) windows / CGAS deposit / claw-back mechanics same. ONCE-IN-LIFETIME (sub-s. 6): if assessee EXERCISES option in any tax year, NOT entitled to exercise option for THE SAME or ANY OTHER tax year. So the TWO-house relaxation is a ONE-TIME CAREER privilege; subsequent residential-house sale must use the standard one-house mechanism. Practitioner alert: track utilisation across the assessee's lifetime tax-history; AO scrutinises in subsequent years if claim repeated. Document option-exercise notice with return.

SUB-SECTIONS (7)-(8) -- FA 2024 INR 10 CRORE CAP

FA 2024 introduced absolute caps targeting ultra-HNI residential transactions: (I) SUB-S. (7) -- COST CAP: if cost of new asset exceeds INR 10 CRORE, the AMOUNT EXCEEDING INR 10 CRORE shall NOT be taken into account for sub-s. (1) -- effectively cost-of-new-asset for exemption purposes capped at INR 10 cr. (II) SUB-S. (8) -- CG CAP: if CG on transfer of original asset exceeds INR 10 CRORE, the AMOUNT EXCEEDING INR 10 CRORE shall NOT be taken into account for sub-s. (2) deposit. So CGAS deposit eligibility capped at INR 10 cr CG. WORKED EXAMPLE: A sells Mumbai bungalow LTCG INR 25 cr; purchases new villa INR 30 cr. PRE-FA 2024: full INR 25 cr exempt (cost-of-new INR 30 cr > LTCG INR 25 cr; CG <= cost). POST-FA 2024: cost cap INR 10 cr; CG cap INR 10 cr. Effective exempt CG = lower of [LTCG INR 25 cr capped at INR 10 cr; cost capped at INR 10 cr] = INR 10 cr. REMAINING CG INR 15 cr CHARGEABLE at 12.5% (or 20%-indexed) under s. 197. Tax: INR 15 cr × 12.5% = INR 1.875 cr. Practical impact: HNW residential transactions > INR 10 cr CG / cost no longer fully shielded; partial exemption only. Plan for Mumbai / Bengaluru / Delhi NCR ultra-prime sales accordingly.

3-YEAR HOLDING LOCK ON NEW ASSET (CLAW-BACK)

Sub-s. (1) clauses (i) and (ii) embed a CLAW-BACK regime: if new residential house is sold within 3 YEARS of its purchase / construction completion: (a) Cost-of-new-asset for computing CG on its sale = NIL (sub-s. 1(i) excess case) OR REDUCED by exempt CG amount (sub-s. 1(ii) full-shielding case); (b) The reduced / NIL cost-base inflates the CG on subsequent sale; (c) Effectively, the original s. 82 exemption is CLAWED BACK through cost-base reduction. Worked example: Original LTCG INR 5 cr fully shielded by INR 6 cr new house. Cost-base of new house = INR 6 cr - INR 5 cr exempt = INR 1 cr. If new house sold in year 2 for INR 7 cr, CG = INR 7 cr - INR 1 cr = INR 6 cr LTCG (held 2 years -- but holding period of new asset for CG character separate analysis). Practitioner: watch the 3-year lock-in; sale before 3 years triggers heavy claw-back especially in fast-appreciating markets.

CASE LAW -- LEADING DECISIONS

(i) CIT v. Sambandam Udaykumar (Kar HC, 2012, 23 taxmann.com 11) -- 'one residential house' may include MULTIPLE FLATS in same building if used as composite residential unit. Pre-FA 2014 era expansive reading. (ii) CIT v. Syed Ali Adil (Andhra Pradesh HC, 2013, 33 taxmann.com 212) -- multiple flats on different floors held as composite-house. Pre-FA 2014. (iii) CIT v. Geeta Duggal (Del HC, 2013, 30 taxmann.com 230) -- pre-FA 2014 multi-house liberal reading. (iv) FA 2014 amendment: 'one residential house' restored as singular -- multiple-flats benefit eliminated. (v) FA 2019 amendment: TWO houses if LTCG <= INR 2 cr (sub-s. 5/6); partial restoration. (vi) Vidya P. Padmanabhan v. CIT (Bom HC) -- construction within 3 years includes period before transfer if work-in-progress at transfer-date. Substantial-completion test. (vii) Sundaram Finance Ltd v. ACIT (Mad HC) -- under-construction property; substantial-completion satisfies. (viii) CIT v. R.L. Sood (Del HC, 2000, 245 ITR 727) -- joint-name purchase by spouse / child funded from CGAS allowable in claimant's hands; ITAT consistent. (ix) CIT v. Rajesh Kumar Jalan (Gauhati HC, 2006) -- 1-year-before purchase requires source-tracing; LTCG funds required for sub-s. (2) test, not for sub-s. (1)(b) one-year-before purchase. (x) CIT v. Ravinder Kumar Arora (Del HC, 2011) -- spouse-name property funded by assessee qualified; co-ownership accepted. (xi) Chettinad Logistics v. CIT (Mad HC) -- under-construction agreement-of-sale qualifies as construction. (xii) Recent FA 2024 transition cases (HC level pending) on cost cap / CG cap interpretation.

PLANNING NOTES (TWELVE AREAS)

(i) HOLDING-PERIOD VERIFICATION -- ensure 24+ months as LTCG-eligible (post FA 2017); short-hold = STCG no s. 82 benefit. (ii) ELIGIBLE ASSET -- residential house chargeable under HP; commercial / agricultural / industrial property NOT eligible (use s. 87/88 instead where applicable). (iii) WINDOW MANAGEMENT -- 1y before purchase requires careful tracking; 2y after purchase + 3y construction; document agreement-to-purchase / sale-deed / construction milestones. (iv) CGAS DEPOSIT DISCIPLINE -- before s. 263 due date for original-transfer-year; SBI / PSU bank Type-A or Type-B; submit deposit-proof with return. (v) UTILISATION TRACKING -- maintain CGAS withdrawal-and-application schedule; partial utilisation works (proportionate exemption). (vi) FA 2024 INR 10 CR DUAL CAP -- for HNW transactions, cost cap AND CG cap both at INR 10 cr; excess remains taxable. Run pre-decision modeling. (vii) FA 2019 TWO-HOUSE OPTION -- once-in-lifetime; reserve for highest-value play (typically retirement-phase); document option-exercise. (viii) JOINT OWNERSHIP -- spouse / child co-name funded from assessee's CGAS allowed (R.L. Sood / Ravinder Kumar Arora); document funding-trail. (ix) UNDER-CONSTRUCTION -- substantial-completion within 3 years suffices; agreement + payment-trail + construction-status critical. (x) CLAW-BACK AVOIDANCE -- DO NOT sell new asset within 3 years; if sale necessary, structure as gift / will / s. 70(1)(b) tax-neutral mode. (xi) NRI ROUTING -- NR resident in original-transfer year may qualify if status as resident; cross-border-property-sale routing needs careful s. 9 + s. 82 alignment. (xii) DOCUMENTATION CHECKLIST -- (a) original sale deed; (b) LTCG computation; (c) reinvestment plan; (d) CGAS deposit slip; (e) utilisation evidence (registry / CC); (f) joint-ownership funding trail; (g) once-in-lifetime declaration where applicable; (h) FA 2024 cap working.

CROSS-REFERENCES

Section 67 -- Capital Gains charge.
Section 70 -- Transactions not regarded as transfer.
Section 71 -- Withdrawal of exemption.
Section 72 -- Mode of computation.
Section 86 -- Specified-asset (other than residential house) reinvestment in residential house (s. 54F equivalent).
Section 89 -- Reference to Valuation Officer.
Section 197 / 198 -- LTCG rates (post FA 2024 12.5% flat / 20%-indexed for individual-HUF land-building).
Section 263 -- Return of income (CGAS deposit anchor date).
Capital Gains Account Scheme, 1988 -- CGAS-88 scheme details.
Income-tax Rules, 2026 -- prescribed CGAS forms / withdrawal procedure.
Section 20 / s. 22 -- Income from House Property head charge.

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