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Exemption from Capital Gains

How much of a capital gain stays tax-free when you reinvest it, under sections 54 to 54GA of the Income-tax Act, 1961.

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For guidance only — not tax advice. Every figure is drawn from BharatX’s verified rule book, with the sections and rules shown alongside it.

Exemption from capital gains: how it works and FAQs

FY 2025-26 (Income-tax Act 1961) and FY 2026-27 (Income-tax Act 2025) · Updated

How it works

Sections 54 to 54GA let you keep part or all of a capital gain tax-free if you reinvest it in a specified new asset.

Sections 54 to 54GA let you keep part or all of a capital gain tax-free if you reinvest it in a specified new asset. Most sections exempt the amount reinvested, up to the gain. Sections 54EC and 54EC-type units cap the exemption at ₹50 lakh. Section 54F is proportionate — exemption = gain × amount invested ÷ net sale consideration. Sections 54 and 54F are capped at ₹10 crore from AY 2024-25.

  1. Pick the section that matches your asset and the new asset you bought.
  2. For 54, 54B, 54D, 54G and 54GA: exemption = the lower of the capital gain and the amount reinvested (54 is also capped at ₹10 crore).
  3. For 54EC and 54EE: exemption = the lower of the gain and the amount invested, but the investment counts only up to ₹50 lakh.
  4. For 54F: exemption = capital gain × amount invested ÷ net sale consideration, never more than the gain (investment capped at ₹10 crore).
  5. Taxable capital gain = capital gain − exemption.

Worked example

Exemption = ₹4,00,000; taxable capital gain = ₹6,00,000.

A ₹10,00,000 long-term gain on shares (section 54F). The net sale consideration is ₹20,00,000 and ₹8,00,000 is invested in a new residential house.

  1. Exemption is proportionate: 10,00,000 × 8,00,000 ÷ 20,00,000.
  2. That is ₹4,00,000 — less than the full gain, so it stands.

Exemption = ₹4,00,000; taxable capital gain = ₹6,00,000.

Frequently asked questions

Which sections give a full exemption for reinvestment?

Sections 54, 54B, 54D, 54G and 54GA exempt the capital gain to the extent it is reinvested in the new asset. Section 54 is capped at ₹10 crore from AY 2024-25.

How much can I save under section 54EC?

Section 54EC (and 54EE) exempt the gain to the extent invested in the specified bonds or units, but the investment counts only up to ₹50 lakh.

Why is section 54F proportionate?

Because 54F applies when you sell any asset other than a house and buy a residential house. The exemption is the share of the gain that matches how much of the sale proceeds you reinvested.

Is there an overall cap?

Sections 54 and 54F are capped at ₹10 crore of exemption from AY 2024-25.

Every figure the calculator shows lists the sections it relies on under “Legal basis”. For guidance only — not tax advice.