Encourage investment in residential property by offering tax exemption on capital gains in Clause 86 of the Income Tax Bill, 2025 vs. Section 54F of Income Tax Act, 1961

Capital gains exemption for residential reinvestment preserved with clearer compliance and monetary caps under the 2025 proposal.

Clause 86 provides a capital gains exemption for individuals and HUFs who reinvest long-term capital gains from specified asset transfers (excluding residential houses) into a residential house in India within prescribed purchase or construction timeframes. The exemption is proportional when net consideration exceeds the replacement cost and full when replacement cost equals or exceeds net consideration. Unutilised gains must be deposited under a notified government scheme before filing returns, and exempted gains become taxable if the replacement asset is transferred within three years. Ownership of multiple residential houses or acquisition of another house within specified periods disqualifies the exemption.