Capital gain exemption on reinvestment in a residential house requires strict timing, proportionate investment and limits on high value acquisitions. Capital gain on transfer of a long term capital asset (other than a residential house) is exempt under the provision if the net sale consideration is invested in one residential house in India purchased within one year before or two years after the transfer, or constructed within three years after the transfer. Exemption is proportionate to the amount invested; the Capital Gain Deposit Scheme is available. If the new asset is transferred within three years, its cost of acquisition is to be reduced by the exemption claimed. Deduction is denied where the assessee owns or acquires any other residential house within the specified periods and income from that house is taxable under house property rules. A proviso restricts recognition of amounts exceeding the statutory high value acquisition threshold.