Sold Land, Shares or Gold? How Section 86 (Old Section 54F) Lets You Save Tax by Buying a Home

If you sell a long-term asset other than a house and buy a residential home in India, section 86 can exempt the gain. The conditions, the formula and the traps.

Aerial view of the coastal road interchange near Haji Ali, with towers behind

Many of our buyers fund a Mumbai flat by selling something else: a plot, shares, mutual funds, gold. If that asset was held long term, the Income-tax Act, 2025 offers an exemption in section 86 (section 54F under the 1961 Act).

Who can claim it

An individual or HUF.
With long-term capital gains from selling a long-term asset other than a residential house.

The conditions, from the Act

Condition	Rule
Buy a house	One residential house in India, within 1 year before or 2 years after the transfer
Or construct	Within 3 years after the transfer
Exemption	If the house costs at least the net consideration, the whole gain is exempt. Otherwise, gain x (cost of new house / net consideration).
Cap	Cost above Rs 10 crore is ignored
Not yet invested by return due date	Deposit the unused amount in the Capital Gains Account Scheme before filing

"Net consideration" means the full sale value minus expenses wholly and exclusively for the transfer.

Section 86 looks at the net sale consideration, not just the gain. Invest less than the full amount and only part of the gain is exempt.

When you lose the exemption

You already own more than one house. No relief if, on the date of transfer, you own more than one residential house other than the new one, and income from it is taxable under house property.
You buy or build another house too soon. Buying another house within 2 years, or building one within 3 years, can make the exempt gain taxable.
You sell the new house within 3 years. The exempt gain becomes taxable in the year of sale.
CGAS money not used. If the deposited amount isn't used in time, the unused portion is taxed when three years from the original sale end.

Illustration

Illustrative only. You sell shares for a net Rs 1.2 crore with a long-term gain of Rs 40 lakh, and buy a flat for Rs 90 lakh. Exempt gain = 40 lakh x 90/120 = Rs 30 lakh. Taxable = Rs 10 lakh.

Related reading

Funding a Mumbai flat from an asset sale? Book a video call.

Sources

Income Tax Department: Section 86, Income-tax Act, 2025

General information, not tax advice. Sales before 1 April 2026 fall under the 1961 Act. Speak to a chartered accountant before acting.

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