INCOME TAX ACT 2025 · CHAPTER IV · PART E · SECTIONS 82–89

Capital Gains — Exemptions

All capital gains exemptions available under the Income Tax Act 2025 — residential house reinvestment, agricultural land, compulsory acquisition, Section 54EC bonds, any asset reinvested in a house, and industrial undertaking shifts. Conditions, timelines, deposit rules, and withdrawal consequences.

📘 Sections: 82 (Residential house — sell house, buy house) · 83 (Agricultural land) · 84 (Compulsory acquisition of industrial land/building) · 85 (Section 54EC bonds) · 86 (Any asset → buy residential house) · 87 (Industrial shift from urban area) · 88 (Industrial shift to SEZ) · 89 (Extension for compulsory acquisition)
🔄 Replaces: Sections 54, 54B, 54D, 54EC, 54F, 54G, 54GA, 54H of the Income Tax Act 1961
📅 Effective: 1st April 2026 (Tax Year 2026-27 onwards)

⚡ Jump to:

Quick Comparison Section 82 — Sell House, Buy House Section 83 — Agricultural Land Section 84 — Compulsory Acquisition Section 85 — 54EC Bonds Section 86 — Any Asset → House Sections 87–88 — Industrial Shift Section 89 — Time Extension Capital Gains Account Scheme

Quick Comparison — All Exemptions at a Glance

Section	Original Asset (Sold)	New Asset (Reinvestment)	Reinvestment Window	Who Can Claim	Cap on Exemption	Old Sec
82	Residential house (LTCA, chargeable under house property)	1 residential house in India (2 if LTCG ≤ ₹2 crore)	Buy: 1 yr before / 2 yr after; Construct: 3 yr after	Individual, HUF	New asset cost capped at ₹10 crore	54
83	Agricultural land (used for agri in 2 yrs before transfer)	Any other agricultural land	Buy: within 2 yr after transfer	Individual, HUF	No cap	54B
84	Land/building of industrial undertaking — compulsorily acquired (used 2 yrs before)	Land/building for shifting/re-establishing the same or another industrial undertaking	Within 3 yr after transfer	Any assessee	No cap	54D
85	Land or building (LTCA) — any assessee	Specified long-term bonds (NHAI / REC / notified bonds) — redeemable after 5 years	Within 6 months of transfer	Any assessee	₹50 lakh per year	54EC
86	Any LTCA except a residential house	1 residential house in India	Buy: 1 yr before / 2 yr after; Construct: 3 yr after	Individual, HUF	New asset cost capped at ₹10 crore; net consideration cap ₹10 crore	54F
87	Machinery/plant/building/land of industrial undertaking in urban area	New machinery/building/land in non-urban area + shifting expenses	1 yr before / 3 yr after transfer	Any assessee	No cap	54G
88	Machinery/plant/building/land of industrial undertaking in urban area	New machinery/building/land in Special Economic Zone (SEZ)	1 yr before / 3 yr after transfer	Any assessee	No cap	54GA

Section 82 — Profit on Sale of Residential House

Replaces Section 54 of the 1961 Act. The most widely used capital gains exemption — sell your home, buy/construct another, and the LTCG is exempt.

Conditions [Section 82(1)]

Original Asset

Must be a residential house (buildings or lands appurtenant thereto)
Income must be chargeable under "Income from House Property"
Must be a Long-Term Capital Asset (held > 24 months)

New Asset

Purchase: within 1 year before or 2 years after the date of transfer
Construct: within 3 years after the date of transfer
Must be 1 residential house in India (or 2 if LTCG ≤ ₹2 crore — see below)

Quantum of Exemption

Situation	Treatment
LTCG exceeds cost of new house	Excess LTCG is taxable. Cost of new house for future sale = Nil
LTCG equal to or less than cost of new house	Full LTCG exempt. Cost of new house for future sale = Cost minus LTCG

Option to Buy Two Houses [Section 82(5)–(6)]

If LTCG does not exceed ₹2 crore, the assessee may opt to purchase or construct two residential houses in India instead of one. Conditions:

This option can be exercised only once in a lifetime — not again in the same or any other tax year [Section 82(6)]
Both houses together count as the "new asset" for the exemption

₹10 Crore Cap [Section 82(7)–(8)]

New asset cap: If cost of new house exceeds ₹10 crore, only ₹10 crore is taken into account for computing the exemption [Section 82(7)]
LTCG cap: If LTCG exceeds ₹10 crore, only ₹10 crore is taken for the purpose of deposit in Capital Gains Account Scheme [Section 82(8)]

In effect, the maximum exemption under Section 82 is capped at ₹10 crore.

New Asset Sold Within 3 Years

If the new house is sold within 3 years of purchase/construction, the LTCG exempted earlier is reversed — it becomes taxable LTCG in the year of sale of the new house, and the cost of the new house is taken as nil (if fully exempted) or reduced (if partially exempted).

Section 83 — Agricultural Land Reinvestment

Replaces Section 54B of the 1961 Act.

Who can claim?

Individual or HUF only

Original Asset

Agricultural land used by assessee, parent, or HUF for agricultural purposes in the 2 years immediately before transfer. Both STCG and LTCG qualify.

New Asset

Any other agricultural land purchased within 2 years after transfer

Quantum of exemption: same as Section 82 — if CG ≤ cost of new land, fully exempt; if CG > cost, excess is taxable. New land sold within 3 years: exemption reversed.

Note: Unlike Section 82 (which requires LTCA), Section 83 applies to both STCG and LTCG from agricultural land — since agricultural land used for farming is a legitimate livelihood asset regardless of holding period.

Section 84 — Compulsory Acquisition of Industrial Land/Building

Replaces Section 54D of the 1961 Act.

Conditions:

Capital gains arise from compulsory acquisition under any law of land, building, or any right therein forming part of an industrial undertaking
The asset must have been used for the business of that undertaking in the 2 years immediately preceding transfer
Within 3 years after transfer, the assessee purchases or constructs land/building for shifting/re-establishing the same or another industrial undertaking
Available to any assessee (not just individuals/HUF)
Applies to both STCG and LTCG

Quantum and reversal rules are the same as Sections 82 and 83. If unutilised deposits not used within 3 years, taxable in year of expiry of 3-year period.

Section 85 — Investment in Specified Long-Term Bonds (54EC Bonds)

Replaces Section 54EC of the 1961 Act. Significant restriction — applies only to land or building, not all long-term assets.

Key Conditions [Section 85(1)]

Condition	Detail
Original asset	Land or building (or both) — must be LTCA (held > 24 months)
New asset	"Long-term specified asset" — bonds redeemable after 5 years issued by NHAI or REC (Rural Electrification Corporation) or any other notified bonds issued on or after 1 April 2018
Investment window	Within 6 months of the date of transfer — no Capital Gains Account Scheme option
Maximum investment cap	₹50 lakh — counted across the year of transfer AND the subsequent year combined. No CGDS deposit option — must actually invest in bonds within 6 months.

Lock-in and Consequences [Section 85(3)–(4)]

Transfer/Conversion within 5 Years

If the bonds are transferred or converted into money within 5 years — the exempted LTCG is deemed LTCG in the year of transfer/conversion

Loan Against Bonds = Conversion

Any loan or advance taken on the security of these bonds is treated as conversion into money on the date of the loan — triggers reversal of exemption

No Double Benefit [Section 85(5)]

Where the investment in bonds has been taken into account for Section 85 exemption, no deduction under Section 123 (deduction for savings/investment under Chapter VIII) shall be allowed for the same investment in any tax year.

Section 86 — Any Long-Term Capital Asset Reinvested in Residential House

Replaces Section 54F of the 1961 Act. The most powerful exemption — applies when any long-term capital asset (shares, gold, jewellery, commercial property, etc.) is sold and the net consideration is invested in a residential house.

Key Difference from Section 82

Aspect	Section 82	Section 86
Original asset	Only a residential house	Any LTCA except a residential house
Reinvestment basis	Capital gains amount	Net consideration (sale price minus transfer expenses)
Partial investment	Proportionate	Proportionate — only the portion of net consideration invested is exempt

Proportionate Exemption Formula [Section 86(1)(i)]

    Where Net Consideration > Cost of New Asset:

    Exempt LTCG = LTCG × (Cost of New Asset ÷ Net Consideration)

    Where Net Consideration ≤ Cost of New Asset:

    Entire LTCG is exempt

Disqualification Conditions [Section 86(5)–(6)]

Section 86 exemption is NOT available if on the date of transfer of the original asset, the assessee:

Owns more than one residential house (other than the new asset); or
Purchases any residential house (other than new asset) within 1 year after transfer of original asset; or
Constructs any residential house (other than new asset) within 3 years after transfer of original asset

Exception: one existing residential house that the assessee owns on the date of transfer is allowed.

₹10 Crore Cap [Section 86(8)–(9)]

Same cap as Section 82 — if cost of new house exceeds ₹10 crore, only ₹10 crore counts for exemption. If net consideration exceeds ₹10 crore, only ₹10 crore counts for CGDS deposit.

Sections 87 & 88 — Industrial Undertaking Shift

Section 87 replaces Section 54G; Section 88 replaces Section 54GA. These exemptions encourage relocation of industries from congested urban areas.

Section 87 — Shift to Non-Urban Area

Original asset: Machinery, plant, building, or land (including rights) used for business of industrial undertaking in an urban area
New asset: Purchase/acquire/construct plant, machinery, building, or land in the new (non-urban) area + shift original asset + notified scheme expenses
Window: 1 year before or 3 years after transfer
Urban area: Defined by Central Govt notification considering population, concentration of industries, and planning needs

Section 88 — Shift to SEZ (Overrides Section 87)

Original asset: Same as Section 87 — plant, machinery, building, land of industrial undertaking in urban area
New asset: Same categories but in a Special Economic Zone (SEZ) — which can itself be in an urban or non-urban area
Window: Same — 1 year before or 3 years after
Overrides: Section 88 overrides Section 87 — so an SEZ shift is governed exclusively by Section 88

For both sections: if CG < new asset cost → entire CG exempt; if CG > new asset cost → excess is taxable. New asset sold within 3 years → cost = nil or reduced. Applies to both STCG and LTCG. Any assessee (not restricted to individuals/HUF).

Section 89 — Extension of Time for Compulsory Acquisition Cases

A Critical Relief Provision

Sections 82, 83, 84, 85, and 86 prescribe specific time windows for reinvestment. Where the transfer is by compulsory acquisition under any law and the compensation is not received on the date of transfer (which is common — compensation often comes much later than the actual acquisition), Section 89 provides that:

The period for acquisition of the new asset / deposit in CGDS is reckoned from the date of receipt of compensation — not from the date of transfer.

This is particularly important for land acquisition under the Right to Fair Compensation Act, 2013 where compensation may be contested and received years after the actual acquisition date.

Capital Gains Account Scheme (CGAS) — How It Works

Multiple sections (82, 83, 84, 86, 87, 88) permit depositing unutilised capital gains into a Capital Gains Account at a specified bank or institution under a Central Government notified scheme, where the new asset cannot be acquired before filing the return of income.

1

When to deposit? — Before filing the return of income, and not later than the due date for filing the return under Section 263(1)

2

Proof of deposit must be attached with the return of income

3

Deemed cost: Amount already utilised for new asset + CGAS deposit = cost of new asset for computing future capital gains

!

If unutilised CGAS amount is NOT used within the prescribed period — it is taxed as LTCG (or CG as applicable) in the tax year in which the prescribed period expires. The assessee is then entitled to withdraw the balance from CGAS.

Practical Q&A

Question	Answer
I sold shares (not a residential house) and want to use Section 82 — can I?	No. Section 82 requires the original asset to be a residential house. Use Section 86 instead — it covers all LTCA other than residential house.
Can I claim both Section 85 (bonds) and Section 82 (house) for the same capital gain?	Section 85 applies only to land/building LTCG. Section 82 applies to residential house LTCG. So for a residential house sale, only Section 82 applies (not 85). For land/building (non-residential), Section 85 and Section 86 may both apply but the same gains cannot be doubly exempt.
LTCG is ₹80 lakh. I invest ₹50 lakh in 54EC bonds. How much is taxable?	Section 85 exemption = ₹50 lakh (invested in bonds). Taxable LTCG = ₹80L − ₹50L = ₹30 lakh @ 12.5%.
I already own 2 houses. Can I claim Section 86 on selling my gold?	No. Section 86(5) disqualifies the exemption if the assessee owns more than one residential house (other than the new asset) on the date of transfer. Owning 2 houses means you cannot claim Section 86.
Can I use CGAS deposit for Section 85 (bonds)?	No. Section 85 has no CGAS option — the only way to claim the exemption is to actually invest in specified bonds within 6 months. CGAS is available only under Sections 82, 83, 84, 86, 87, and 88.
My factory land was compulsorily acquired. Compensation received 3 years later. Has the time limit for reinvestment expired?	No. Section 89 gives relief — the reinvestment window runs from the date of receipt of compensation, not the date of acquisition.

📖 Capital Gains — Complete Series

← Tax Rates — Sections 196–198 ← Capital Gains Overview ← Capital Asset & Transfer ← Computing Capital Gains

📌 Source: Income Tax Act 2025, Act No. 30 of 2025 — Section 82 (page 114), Section 83 (page 115), Section 84 (page 116), Section 85 (page 117), Section 86 (page 118), Section 87 (page 119), Section 88 (page 120), Section 89 (page 121), as published in the Gazette of India Extraordinary dated 21st August 2025. Use the Section Cross-Reference tool to map 1961 Act sections to 2025 Act equivalents.