Sections 82, 85, 86 of the new Income-tax Act: saving capital gains tax when you sell a flat or plot

Rules and rates as of 12 October 2026.

If you sell a flat, a plot or any other long-held asset at a profit, the Income-tax Act, 2025 gives you three ways to keep some or all of that long-term capital gain out of tax by putting money back into a house or into specified bonds. Under the 1961 Act these were sections 54, 54EC and 54F, names that still dominate conversations with brokers and banks. Since 1 April 2026 they are section 82, section 85 and section 86. We checked each number against the Act's text on the Income Tax Department's portal; the mapping holds.

Which section fits which sale

New section (formerly)	What you sold	Where the money goes	Window	Ceiling
s. 82 (54)	A residential house	One residential house in India	Buy 1 year before to 2 years after; or build within 3 years	New house cost counted only up to ₹10 crore
s. 85 (54EC)	Land, a building, or both	Long-term specified bonds	Within 6 months of the sale	₹50 lakh
s. 86 (54F)	Any long-term asset other than a residential house	One residential house in India	Buy 1 year before to 2 years after; or build within 3 years	New house cost and net sale consideration counted only up to ₹10 crore

Sections 82 and 86 are open only to individuals and Hindu undivided families. Section 85 is not restricted that way in its text.

Section 82: selling one home to buy another

Section 82 works on the gain, not the sale price. If the new house costs at least as much as your long-term gain, none of the gain is taxed. If it costs less, the shortfall is taxed. The house must be in India.

• Two houses, once. If the gain is no more than ₹2 crore, you may put it into two residential houses instead of one. The Act says this choice can be used only once; having used it, you cannot use it again in that or any other tax year.
• Three-year lock-in. If you sell the new house within three years of buying or building it, the exemption is clawed back by cutting the new house's cost when you compute the gain on that later sale.
• The ₹10 crore cap. Any part of the new house's cost above ₹10 crore is ignored, and gains above ₹10 crore are ignored for the deposit rule below.

Section 86: selling something that is not a house

Section 86 covers a long-term gain from anything other than a residential house: a plot, shares, gold, a commercial unit. The windows are the same as section 82, but the test is stricter in two ways.

First, it works on the net consideration (sale price minus expenses wholly for the sale), not the gain. Put the whole net consideration into the new house and the whole gain is exempt. Put in less and only a proportion is exempt:

Exempt gain = Capital gain × Cost of new house ÷ Net consideration

Second, there are conditions on other homes. The exemption is lost if, on the date of sale, you own more than one residential house apart from the new one, or if you buy another house within one year or build one within three years of the sale (in each case, a house whose income is taxed as house property). Buying another house within two years or building one within three years after claiming the exemption, or selling the new house within three years, brings the exempted gain back into tax in that year. The ₹10 crore ceiling applies to both the cost of the new house and the net consideration.

Section 85: the ₹50 lakh bond route

Section 85 is the only route that does not need a house. The gain must come from selling land, a building or both, and it must be invested in "long-term specified assets" within six months of the sale. The Act defines these as bonds redeemable after five years and issued on or after 1 April 2018 by the National Highways Authority of India or Rural Electrification Corporation Limited, or other bonds the Central Government notifies. We have not reviewed the current list of notified issuers; check it with the issuer or your adviser before you apply.

• The limit. The investment that counts cannot exceed ₹50 lakh in a tax year, and the Act also caps it at ₹50 lakh across the year of sale and the following tax year. Splitting a large gain across two financial years does not double the limit.
• The lock-in. Transfer the bonds, or turn them into money, within five years and the exempt gain becomes taxable that year. Taking a loan against the bonds counts as turning them into money.
• No double benefit. The same money cannot also be claimed as a deduction under section 123 (the old 80C).

Where the ₹10 crore cap came from

The cap is not new to the 2025 Act. The Finance Bill 2023 memorandum explained that sections 54 and 54F were meant to ease the housing shortage, but large claims by high-net-worth taxpayers buying very expensive houses defeated that purpose. It capped the new house's cost at ₹10 crore from assessment year 2024-25. Sections 82 and 86 carry the same cap. Illustration: a ₹14 crore gain reinvested in a ₹15 crore house leaves ₹4 crore taxable, which at 12.5% is ₹50 lakh of tax before surcharge and cess.

The Capital Gains Accounts Scheme: parking money until you buy

Few people close on a new house before the return is due. Sections 82 and 86 let you deposit the unused amount in a capital gains account with a bank notified under the Central Government's scheme, before you file and not later than your due date under section 263(1), and attach proof with the return. The deposit counts as money spent on the new house.

Two points matter. If the deposit is not used within three years of the sale, the unused part becomes taxable in the year the three years end. And you cannot simply withdraw the balance: under paragraph 13 of the Capital Gains Accounts Scheme, 1988, closing the account needs an application in Form G approved by your Assessing Officer, with the pass book (Account A, savings) or deposit receipt (Account B, term deposit).

Worked example

An illustrative flat bought in 2018 for ₹72,00,000 (including stamp duty and registration) is sold in September 2026 for ₹1,20,00,000, with ₹1,20,000 of brokerage and legal fees.

• Net consideration = ₹1,20,00,000 − ₹1,20,000 = ₹1,18,80,000
• Long-term capital gain = ₹1,18,80,000 − ₹72,00,000 = ₹46,80,000
• Tax at 12.5% under section 197 = ₹46,80,000 × 12.5% = ₹5,85,000 (before surcharge and cess)

Because this flat was bought before 23 July 2024, section 197(3) lets the seller compare this with tax at 20% on the gain worked out with indexed cost and pay the lower. We have not computed the indexed figure here; it needs the notified cost inflation index for both years.

Route	Amount reinvested	Exempt gain	Taxable gain	Tax at 12.5%
None	₹0	₹0	₹46,80,000	₹5,85,000
s. 82: new flat costing ₹90,00,000	₹90,00,000	₹46,80,000	₹0	₹0
s. 82: new flat costing ₹30,00,000	₹30,00,000	₹30,00,000	₹16,80,000	₹2,10,000
s. 85: bonds within six months	₹46,80,000	₹46,80,000	₹0	₹0
s. 86 (if the asset sold had been a plot): new house costing ₹80,00,000	₹80,00,000	₹31,51,515	₹15,28,485	₹1,91,061

The last row shows why section 86 can surprise people. With a ₹80 lakh house, the section 82 seller would have no tax at all, because ₹80 lakh exceeds the ₹46.8 lakh gain. Under section 86 the exemption is ₹46,80,000 × 80,00,000 ÷ 1,18,80,000 = ₹31,51,515, so ₹15,28,485 stays taxable. To exempt the whole gain under section 86, the house must cost at least the ₹1,18,80,000 net consideration.

All figures are illustrative. Surcharge, cess, the basic exemption adjustment for low-income sellers in section 197(2), and your own documents can change the result. A chartered accountant should check the computation before you file.