Clarity on Capital Gains

Table of Contents

• I sold a residential plot. What can I do to save on long-term capital gain?

• I sold a residential house. What can I do to save on long-term capital gain?

• I sold a non-residential house. What can I do to save on long-term capital gain?

• I sold unlisted shares. What can I do to save on long-term capital gain?

• How is it decided that gains are long-term or short-term?

Disclaimer: This blog has been written by one of our teammates, sharing thoughts from their own journey and experience in home building. The author is not a professional writer, so there may be minor grammatical or marketing imperfections. We’ve intentionally kept it unchanged to preserve its authenticity and honest tone.

I sold a residential plot. What can I do to save on long-term capital gain?

You need to invest the complete sale proceeds (sale price - selling expenses, NOT just capital gain) in a new house (plot + construction on it of a house OR a ready-house like flat or a villa). You cannot just buy a plot for exemption. If the plot is bought, at least a minimum construction needs to be done for the completion certificate so that the exemption can be claimed.

• If investment in a new house is less than the sale proceeds, then a proportional exemption is granted.

• If you buy a house, then this purchase should be done 1 year prior to or within 2 years of the sale. Receipt of the completion certificate for the house will be the date considered.

• If you buy a plot and construct, then it should be within 3 years.

To qualify, you should not own more than one residential house (other than the new one purchased). The maximum exemption claimed is 10 cr. You cannot sell this house for 3 years from its purchase or completion.

I sold a residential house. What can I do to save on long-term capital gain?

You need to invest capital gain in a new house (plot + construction of a house OR a ready-made house like a flat or a villa). You cannot just buy a plot for exemption. If the plot is bought, at least a minimum construction needs to be done for the completion certificate, so that the exemption can be claimed.

• If investment in a new house is less than the sale proceeds, then a proportional exemption is granted.

• If you buy a house, then this purchase should be done 1 year prior or within 2 years of the sale. Receipt of the completion certificate for the house will be the date considered.

• If you buy a plot and construct, then it should be within 3 years.

The maximum exemption claimed is 10 cr. You cannot sell this house for 3 years from its purchase or completion.

I sold a non-residential house. What can I do to save on long-term capital gain?

This is applicable whether a commercial plot is sold or constructed commercial property is constructed. 

You need to invest the complete sale proceeds (sale price - selling expenses, NOT just capital gain) in a new house (plot + construction on it of a house OR a ready-house like flat or a villa). You cannot just buy a plot for exemption. If the plot is bought, at least minimum construction is to be done for the completion certificate, so that the exemption can be claimed.

• If investment in a new house is less than the sale proceeds, then a proportional exemption is granted.

• If you buy a house, then this purchase should be done 1 year prior to or within 2 years of the sale. Receipt of the completion certificate for the house will be the date considered.

• If you buy a plot and construct, then it should be within 3 years.

To qualify, you should not own more than one residential house (other than the new one purchased). The maximum exemption claimed is 10 cr. You cannot sell this house for 3 years from its purchase or completion.

I sold unlisted shares. What can I do to save on long-term capital gain?

You need to invest the complete sale proceeds (sale price - selling expenses, NOT just capital gain) in a new house (plot + construction of a house OR a ready-house like flat or a villa). You cannot just buy a plot for exemption. If the plot is bought, at least a minimum construction needs to be done for the completion certificate, so that the exemption can be claimed.

• If investment in a new house is less than the sale proceeds, then a proportional exemption is granted.

• If you buy a house, then this purchase should be done 1 year prior to or within 2 years of the sale. Receipt of the completion certificate for the house will be the date considered.

• If you buy a plot and construct, then it should be within 3 years.

To qualify, you should not own more than one residential house (other than the new one purchased). The maximum exemption claimed is 10 cr. You cannot sell this house for 3 years from its purchase or completion.

This is NOT applicable to capital gains from listed shares.

How is it decided that gains are long-term or short-term?

In case of real estate or unlisted shares, if the property is owned for more than 2 years, it is a long-term capital gain.

1	Asset type sold	Residential Plot	Residential House	Non-Residential/Commercial Property	Unlisted Shares
2	Section applicable	54F	54	54F	54F
3	How much is to be reinvested to claim the capital gain exemption	Entire Sale proceeds after deducting the Sale expenses	If capital gain is within Rs. 2cr exemption for purchase/construction of two houses can be claimed otherwise exemption for only 1 house can be claimed.	Entire Sale proceeds after deducting the Sale expenses	Entire Sale proceeds after deducting the Sale expenses
4	Investment should be in which type of property	New Residential House (ready or under construction)	New Residential House (ready or under construction)	New Residential House (ready or under construction)	New Residential House (ready or under construction)
5	Time Period of Purchase	a) If purchased, one year before or two years after b) If constructed, within 3 years	a) If purchased, one year before or two years after b) If constructed, within 3 years	a) If purchased, one year before or two years after b) If constructed, within 3 years	a) If purchased, one year before or two years after b) If constructed, within 3 years
6	Maximum Exemption	10 Crore	10 Crore	10 Crore	10 Crore
7	Other Condition	a) Cannot own more than one other residential house b) A new house cannot be sold within 3 years	a) A new house cannot be sold within 3 years	a) Cannot own more than one other residential house b) A new house cannot be sold within 3 years	a) Cannot own more than one other residential house b) A new house cannot be sold within 3 years c) Not applicable to listed shares

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Disclaimer: This note/ blog is written for general information only. Before making a decision, please consult a financial advisor or authority. We are NOT financial experts.

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About The Author

Nitish Kumar, Assistant Manager - Taxation At Prithu Homes

Nitish Kumar is an Assistant Manager - Taxation at Prithu Homes, with years of experience handling taxation and financial compliance related to real estate. Through his blogs, he aims to simplify complex financial topics and help readers make more informed property decisions.