Capital Gains Tax Exemptions on Reinvestment

NRIs can wipe out long-term capital gains tax entirely, or substantially reduce it, by reinvesting into specific assets within specific timelines. Three sections do this, and which one applies depends entirely on what you sold.

Section 54, sold a residential house, buying another residential house

Reinvest your long-term capital gain into one residential house in India, two houses if your gain is under 2 crore rupees, a once-in-a-lifetime option, and your exemption is the lowest of: your actual capital gain, the amount you invested, or 10 crore rupees.

Section 54EC, sold land, a building, or both, investing in specified bonds

Put your gain into tax-saving bonds issued by NHAI, REC, PFC, IRFC, HUDCO, IREDA, or any other bonds the government notifies, within 6 months of the sale, and hold them for 5 years. Your exemption is the lowest of your capital gain, the amount invested, or 50 lakh rupees.

Section 54F, sold anything other than a residential house, buying one residential house

Plots, commercial property, securities, gold, whatever it was, if it was not a house, this is your route. Reinvest into one residential house in India, and your exemption is the lowest of: your full capital gain, the gain in the same proportion that your reinvestment bears to your net sale consideration, or 10 crore rupees.

The distinction that actually matters

Section 54 only requires you to reinvest the gain itself. Section 54F requires you to reinvest the entire net sale consideration to get the full exemption, if you only reinvest part of it, you only get a proportionate exemption on that part.

A quick comparison

Section	Gain from	Reinvest into	Cap
54	Residential house	One or two residential houses in India	10 crore rupees
54EC	Land or building	Specified infrastructure bonds	50 lakh rupees
54F	Any other long-term asset	One residential house in India	10 crore rupees

All three sections carry several additional eligibility conditions (things like whether you already own another house, exact holding periods, exact investment windows) beyond what is summarized here, worth confirming your specific situation against before you commit to a transaction assuming the exemption will apply.