Section 82 — Profit on sale of property used for residence. Successor to s.54 of the 1961 Act.
Section 82 is in Chapter IV — Computation of Total Income, which runs from section 13 to section 95.
Sub-section (1) applies where an individual or HUF has a long-term capital gain from transfer of a residential house (buildings or lands appurtenant, the income of which is chargeable under 'Income from house property') and has bought one residential house in India within one year before or two years after the transfer, or constructed one within three years after it: if the gain exceeds the cost of the new asset the excess is charged under section 67 and the new asset's cost is taken as nil for a sale within three years, and if the gain is equal to or less than that cost nothing is charged and the new asset's cost is reduced by the gain for a sale within three years. Sub-section (2) requires any amount not used before the return is filed to be deposited under a notified scheme in a specified bank or institution, by the section 263(1) due date at the latest, with proof filed with the return. Sub-section (3) treats the amount already spent plus the deposit as the cost of the new asset, and sub-section (4) charges the unutilised deposit under section 67 in the tax year in which three years from the transfer expire, allowing the assessee to withdraw it under the scheme. Sub-section (5) permits two houses instead of one where the gain does not exceed two crore rupees, sub-section (6) makes that option available once only, and sub-sections (7) and (8) cap the cost of the new asset and the capital gain taken into account at ten crore rupees each.
It relieves an individual or HUF who rolls the gain on one residential house into another from being taxed on the switch, with the deposit scheme covering the gap between the return filing date and the purchase or construction. The three-year cost-reduction rule, the once-only two-house option and the ten crore ceilings show the relief is aimed at genuine replacement of a home rather than repeated or very large reinvestment.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Window to purchase the new residential house | One year before or two years after | Measured from the date of transfer of the original asset | Sub-section (1)(b) |
| Window to construct the new residential house | Three years after | Measured from the date of transfer of the original asset | Sub-section (1)(b) |
| Period within which a sale of the new asset triggers the cost adjustment | Three years | From the purchase or construction of the new asset; cost taken as nil where the gain exceeded the cost, or reduced by the gain where it did not | Sub-section (1)(i) and (ii) |
| Deadline for depositing the unutilised gain | Before filing the return and not later than the due date under section 263(1) | Deposit in a specified bank or institution under the Central Government's notified scheme, with proof filed with the return | Sub-section (2)(b) and (c) |
| Year in which an unutilised deposit is charged to tax | The tax year in which three years from the date of transfer expire | Applies to the amount deposited but not used for purchase or construction within the sub-section (1) period; charged under section 67 | Sub-section (4)(a) |
| Gains ceiling for the two-house option | Two crore rupees | The capital gain under sub-section (1) must not exceed this amount for the assessee to opt for two residential houses in India | Sub-section (5) |
| Cap on the cost of the new asset | Ten crore rupees | Any excess over ten crore rupees is ignored for the purposes of sub-section (1) | Sub-section (7) |
| Cap on the capital gain taken into account for the deposit rule | Ten crore rupees | Any excess over ten crore rupees on transfer of the original asset is ignored for the purposes of sub-section (2) | Sub-section (8) |
If the money will not be spent before you file, the deposit is not optional — sub-section (2) requires it in a specified bank or institution under the notified scheme, made by the section 263(1) due date, with proof attached to the return, and a deposit left unused is taxed in the year the three-year period ends. Selling the new house within three years is expensive: its cost is taken as nil where the original gain exceeded it, or reduced by the gain where it did not, so the relief is effectively recaptured. The two-house option under sub-section (5) is available only where the gain is two crore rupees or less, and sub-section (6) allows it for one tax year in a lifetime. Above ten crore rupees, the extra cost and the extra gain simply do not count.
An individual has a long-term capital gain of Rs 1.9 crore on the transfer of a residential house and, the gain not exceeding the two crore rupee ceiling in sub-section (5), opts to buy two residential houses in India instead of one. Had the gain been Rs 2.1 crore that option would have closed and only one house could have qualified under sub-section (1)(b). Having used the option once, sub-section (6) bars him from exercising it again in that or any other tax year. Whatever part of the gain is not spent before the return is filed must be deposited under the notified scheme by the section 263(1) due date with proof filed alongside the return, failing which it is charged under section 67 in the year the three years from the transfer expire.
It is claimed in the capital gains part of the return under section 263, and the proof of deposit in the specified bank or institution has to be submitted with that return under sub-section (2)(c). It comes back in an assessment for the tax year in which three years from the transfer expire, when an unutilised deposit is charged under section 67.
if the capital gains is equal to or less than the cost of the new asset, no capital gains shall be charged under section 67 and for computing capital gains from the transfer of the new asset within three years of its purchase or construction, the cost shall be reduced by the amount of the capital gains
See the full 1961 to 2025 concordance.
See every circular and notification on this section, or the circulars index.
See every circular and notification on this section, or the notifications index.