Capital gains exemption for residential property applies subject to timing, replacement limits and lifetime cap on eligible investment. Section 54 allows individuals and HUFs to claim capital gains exemption on transfer of a long term residential house by reinvesting in a new residential house in India within specified time limits (purchase within one year before or two years after transfer; construction within three years). Exemption may be preserved by depositing gains in the Capital Gains Deposit Scheme before filing the return. If the new asset is transferred within three years, its cost is reduced by the exempted gain. The statute restricts the number of replacement houses based on the quantum of gain and caps the amount of new asset cost eligible for exemption, with a one time option to acquire two houses where permitted.