A community member messaged me last year with this situation:
“Mani, I sold my flat in Pune for ₹1.2 crore.
The buyer deducted ₹15 lakh as TDS. My CA says I can save the entire capital gains tax if I buy another house within 2 years.
But I live in the US.
How does this work? Can I even claim this?”
Yes, she could. And she did. She saved over ₹8 lakh in taxes.
Sections 54 and 54F of the Income Tax Act are two of the most powerful tax-saving tools available to NRIs.
They let you avoid paying capital gains tax entirely – or at least significantly reduce it – by reinvesting in residential property in India.
But here’s the thing. These sections are also among the most misunderstood. The rules are strict. The timelines are tight. And one mistake can cost you lakhs.
I’ve seen NRIs lose exemptions because they missed a deadline by a week. I’ve also seen others save crores because they planned ahead.
Here’s the full breakdown – both sections, side by side, with everything NRIs need to know.
Section 54 vs Section 54F: The Core Difference
Before we go deep, let’s get the basic distinction clear.
Section 54: Applies when you sell a residential house and buy another residential house.
Section 54F: Applies when you sell any long-term asset OTHER than a residential house (like land, shares, gold, mutual funds, commercial property) and buy a residential house.
Think of it this way:
- Sold a house → buying another house? That’s Section 54.
- Sold shares, land, gold, or commercial property → buying a house? That’s Section 54F.
Both sections are available to NRIs. Both require reinvestment in a residential house in India. Both can save you significant tax.
But the rules differ in important ways. Let me break each one down.
Section 54: Selling One House, Buying Another
Who Can Claim It?
Only Individuals and Hindu Undivided Families (HUFs).
Companies, firms, LLPs, and trusts cannot claim this. But NRIs who are individuals? Absolutely eligible.
What Must You Sell?
A long-term residential house property in India.
“Long-term” means you held the property for more than 24 months.
If you bought it in January 2022 and sell it in March 2024, that’s 26 months – it qualifies.
The property must be a residential house, and income from it must be chargeable under “Income from House Property.”
If you were using it as an office and declaring the income under business income, it may not qualify.
What Must You Buy?
One residential house in India.
The new property must be in India. Buying a house abroad does NOT qualify for Section 54 exemption. This was clarified by the Finance Act 2014.
You can either purchase a ready property or construct a new one.
Timelines
This is where NRIs need to be very careful.
| Action | Deadline |
|---|---|
| Purchase a new house | Within 1 year BEFORE the sale, or within 2 years AFTER the sale |
| Construct a new house | Within 3 years AFTER the sale |
Example: You sell your Bangalore flat on March 15, 2026.
- Purchase deadline: March 15, 2028 (2 years after)
- Construction deadline: March 15, 2029 (3 years after)
- You could also have purchased a house as early as March 15, 2025 (1 year before the sale)
If you’re an NRI living abroad, finding and buying the right property within 2 years can be challenging. That’s where the Capital Gains Account Scheme (CGAS) comes in – more on that below.
How Much Exemption?
The exemption is the lower of:
- The actual long-term capital gain, OR
- The amount invested in the new residential house
Example:
Sold old house for ₹1.5 crore. Indexed cost of acquisition: ₹60 lakh.
Long-term capital gain: ₹90 lakh.
New house purchased for ₹1.2 crore.
Exemption under Section 54: ₹90 lakh (the full capital gain, because the investment of ₹1.2 crore exceeds the gain of ₹90 lakh).
If the new house cost only ₹50 lakh, the exemption would be ₹50 lakh, and ₹40 lakh would remain taxable.
The ₹10 Crore Cap
Starting from Assessment Year 2024-25 (applicable from FY 2023-24), the maximum exemption under Section 54 is capped at ₹10 crore.
For most NRIs, this won’t be an issue. But if you’re selling ultra-premium property in Mumbai, Delhi, or Bangalore, any capital gain above ₹10 crore will be taxable even if you reinvest the full amount.
Two-House Option (Once in a Lifetime)
If your long-term capital gain is ₹2 crore or less, you can invest in two residential houses instead of one, and claim exemption on both.
This option can be used only once in a lifetime.
Once claimed, you cannot use this option again in any subsequent year.
This is useful for NRIs planning to buy property in India for both personal use and as an investment.
Lock-In Period
You must NOT sell the new house within 3 years of purchase or construction.
If you do, the exemption gets reversed. The original capital gain becomes taxable in the year you sell the new house.
Section 54F: Selling Non-House Assets, Buying a House
Who Can Claim It?
Same as Section 54 – Individuals and HUFs only. NRIs are eligible.
What Must You Sell?
Any long-term capital asset OTHER than a residential house.
This includes:
- Plot of land (not a house)
- Commercial property
- Listed shares (held over 12 months)
- Unlisted shares (held over 24 months)
- Mutual fund units
- Gold, jewelry
- Bonds, debentures
If you sold Indian stocks or mutual funds with large long-term capital gains, Section 54F is your friend.
What Must You Buy?
One residential house in India. Same as Section 54.
The Key Difference: Net Consideration, Not Just Capital Gains
This is the most commonly misunderstood part.
Under Section 54, you invest the capital gain amount.
Under Section 54F, you invest the entire net sale consideration (full sale price minus transfer expenses).
If you sell a plot of land for ₹1 crore and the capital gain is ₹60 lakh, Section 54F doesn’t just look at the ₹60 lakh. It looks at the full ₹1 crore.
To get full exemption, you must invest the entire net sale consideration in the new house.
If you invest only part of it, you get proportionate exemption.
The Proportionate Formula
Exemption = Capital Gain x (Amount Invested in New House / Net Sale Consideration)
Example 1 (Full Investment):
Sold land for ₹1 crore. Capital gain: ₹60 lakh. Bought house for ₹1 crore.
Exemption = ₹60 lakh x (₹1 crore / ₹1 crore) = ₹60 lakh (full exemption).
Example 2 (Partial Investment):
Sold land for ₹1 crore. Capital gain: ₹60 lakh. Bought house for ₹70 lakh.
Exemption = ₹60 lakh x (₹70 lakh / ₹1 crore) = ₹42 lakh.
Taxable capital gain = ₹60 lakh – ₹42 lakh = ₹18 lakh.
See the difference? In Section 54F, partial investment means proportionately less exemption. In Section 54, partial investment simply means you pay tax on the uninvested portion of the gain.
Ownership Restriction (Critical for NRIs)
To claim Section 54F, you must NOT own more than one residential house (apart from the new one) on the date of selling the original asset.
This is a strict condition. If you own two flats in India when you sell your gold or shares, you CANNOT claim Section 54F.
Many NRIs own inherited property in India plus maybe another house. This restriction can disqualify them from 54F.
Additional Restriction
After claiming 54F, you must NOT:
- Purchase another residential house within 2 years of the sale
- Construct another residential house within 3 years of the sale
If you violate this, the exemption gets clawed back.
Same ₹10 Crore Cap
Starting from AY 2024-25, the maximum exemption under Section 54F is also capped at ₹10 crore.
Section 54 vs Section 54F: Complete Comparison
| Feature | Section 54 | Section 54F |
|---|---|---|
| Asset sold | Residential house | Any long-term asset EXCEPT residential house |
| Asset purchased | Residential house in India | Residential house in India |
| Who can claim | Individuals and HUFs | Individuals and HUFs |
| NRI eligible | Yes | Yes |
| What to invest | Capital gain amount | Entire net sale consideration |
| Exemption calculation | Lower of capital gain or investment | Proportionate to sale consideration invested |
| Timeline – purchase | 1 year before or 2 years after sale | 1 year before or 2 years after sale |
| Timeline – construction | 3 years after sale | 3 years after sale |
| Two-house option | Yes (if gain ≤ ₹2 crore, once in lifetime) | No |
| Ownership restriction | Must not own more than 1 other house on date of transfer | Must not own more than 1 other house on date of transfer |
| Lock-in for new house | 3 years | 3 years |
| Maximum exemption | ₹10 crore | ₹10 crore |
| CGAS available | Yes | Yes |
Capital Gains Tax Rates: What NRIs Pay Without Exemption
Before planning your exemption, understand what you’d owe without it.
Budget 2024 Changes (Applicable from July 23, 2024)
The Union Budget 2024 changed the capital gains tax structure significantly.
For property sold on or after July 23, 2024:
- LTCG rate: 12.5% WITHOUT indexation benefit
For property acquired BEFORE July 23, 2024:
- You can choose the better of:
- 20% with indexation (old method), OR
- 12.5% without indexation (new method)
For property acquired ON or AFTER July 23, 2024:
- Only 12.5% without indexation applies
This is important for NRIs because the removal of indexation can increase your taxable gain significantly, especially for properties held for many years where inflation adjustment was substantial.
Understanding the full capital gains tax framework is essential before deciding whether to claim 54/54F or just pay the tax.
Example:
Bought a flat in 2010 for ₹30 lakh. Sold in 2025 for ₹90 lakh.
Method 1 (20% with indexation): Indexed cost (using CII 363/167) = ₹30 lakh x (363/167) = ₹65.21 lakh LTCG = ₹90 lakh – ₹65.21 lakh = ₹24.79 lakh Tax at 20% = ₹4.96 lakh
Method 2 (12.5% without indexation): LTCG = ₹90 lakh – ₹30 lakh = ₹60 lakh Tax at 12.5% = ₹7.5 lakh
Here, Method 1 is better. You’d pay ₹4.96 lakh instead of ₹7.5 lakh.
But if you claim Section 54 and buy a house for ₹25 lakh or more (i.e., covering the ₹24.79 lakh gain), you pay zero tax. That’s the power of Section 54.
TDS on Property Sale by NRIs: The First Hurdle
This is the practical reality every NRI faces.
When an NRI sells property in India, the buyer is legally required to deduct TDS before paying you.
TDS rates for NRIs:
- Long-term capital gains (property held > 24 months): 12.5% of the sale consideration (not just the gain)
- Short-term capital gains (property held ≤ 24 months): 30% of the sale consideration
The problem: TDS is calculated on the full sale consideration, not on the actual capital gain. This means the buyer withholds far more than your actual tax liability.
Example:
You sell a property for ₹1 crore. Your actual capital gain is ₹20 lakh. Tax on ₹20 lakh at 12.5% = ₹2.5 lakh.
But the buyer deducts TDS at 12.5% on ₹1 crore = ₹12.5 lakh.
That’s ₹10 lakh MORE than your actual tax. You’d claim this back as a refund when filing your ITR.
Lower TDS Certificate (Section 197)
To avoid excess TDS, apply for a Lower TDS Certificate from the Assessing Officer before the sale.
You file Form 13 with the Income Tax Department. If approved, the officer issues a certificate directing the buyer to deduct TDS at a lower rate (or sometimes nil, if you’re claiming full exemption under Section 54/54F).
Timeline: Apply well in advance. Processing takes 2-4 weeks typically. You need the certificate BEFORE the sale transaction.
Documents needed:
- Copy of sale agreement
- Proof of reinvestment plan (new property purchase agreement, CGAS account details)
- Computation of capital gains
- PAN card
- Previous ITRs
This is one of the most useful NRI tax strategies. Without it, a large chunk of your sale proceeds gets locked up with the IT Department as excess TDS until your refund comes through (which can take months).
Capital Gains Account Scheme (CGAS) for NRIs
Here’s where many NRIs miss out on huge savings.
What if you can’t find and buy the right property immediately after selling?
The Capital Gains Account Scheme (CGAS) lets you park the capital gains (for Section 54) or the full net consideration (for Section 54F) in a designated bank account while you search for property.
How It Works
- Sell the property/asset
- Before your ITR filing due date (July 31 for most individuals), deposit the unutilized amount into a CGAS account
- Claim the exemption in your ITR
- Use the CGAS funds to buy/construct the new house within the allowed timeframe (2 years for purchase, 3 years for construction)
If you DON’T deposit in CGAS before the ITR due date AND haven’t purchased property yet, you lose the exemption.
NRI-Specific: Non-Resident CGAS (NRCGAS)
NRIs must open a Non-Resident Capital Gains Account Scheme (NRCGAS) account, not a regular CGAS account.
This is an NRO-linked account. The funds are non-repatriable until the exemption conditions are fully met.
Types of CGAS accounts:
- Type A (Savings): Earns interest at savings account rates
- Type B (Term Deposit): Earns interest at FD rates
Important: Interest earned on CGAS deposits is taxable. It’s treated as “Income from Other Sources.” Many NRIs forget this.
Authorized Banks
As of 2025, 19 banks are authorized to open CGAS accounts, including SBI, PNB, Bank of Baroda, Canara Bank, and several major private banks. Check with your bank whether they offer NRCGAS specifically.
Withdrawal Rules
- Use Form C to withdraw for purchasing a house
- Use Form D to withdraw for constructing a house
- The withdrawn amount must be utilized within 60 days
- To close the account after full utilization, submit Form G (requires certification from the Assessing Officer)
If the CGAS funds are NOT utilized within the prescribed period (2 years for purchase, 3 years for construction), the unutilized amount becomes taxable as long-term capital gains in the year the deadline expires.
Section 54EC: The Bond Alternative
What if you don’t want to buy property? There’s another option.
Section 54EC allows you to invest capital gains in specified bonds instead of property.
Key Details
| Feature | Section 54EC |
|---|---|
| Who can claim | Any taxpayer (individuals, companies, NRIs) |
| Applies to | Capital gains from land or building (long-term) |
| Investment in | Bonds of NHAI, REC, IRFC, PFC |
| Maximum investment | ₹50 lakh per financial year |
| Lock-in period | 5 years |
| Interest rate | 5-5.25% (taxable) |
| Investment deadline | Within 6 months of the sale |
NRI Perspective
- NRIs ARE eligible for 54EC bonds
- The investment must be from the NRO account
- Interest on 54EC bonds is taxable (not great returns at 5%)
- The 5-year lock-in is shorter than property (which has a 3-year lock-in but more practical flexibility)
When 54EC makes sense:
- You don’t want to deal with finding and buying property
- Your capital gain is ≤ ₹50 lakh
- You value simplicity over returns
When 54/54F is better:
- Your capital gain exceeds ₹50 lakh (54EC is capped at ₹50 lakh)
- You actually want to buy property in India
- You want potentially better returns (property appreciation vs 5% bond interest)
Many NRIs in our community use a combination – ₹50 lakh in 54EC bonds and the rest under Section 54 or 54F in property.
Practical NRI Scenarios
Let me walk through real situations from our community.
Scenario 1: NRI Sells Flat in Mumbai, Plans to Buy in Bangalore
Situation: Anita (US NRI) sells her Mumbai flat for ₹2 crore. She bought it in 2012 for ₹55 lakh. She wants to buy a house in Bangalore.
Computation:
Method 1 (20% with indexation): Indexed cost = ₹55 lakh x (363/220) = ₹90.75 lakh. LTCG = ₹2 crore – ₹90.75 lakh = ₹1,09,25,000. Tax at 20% = ₹21.85 lakh + cess.
Method 2 (12.5% without indexation): LTCG = ₹2 crore – ₹55 lakh = ₹1,45,00,000. Tax at 12.5% = ₹18.13 lakh + cess.
Method 2 is slightly better here (₹18.13 lakh vs ₹21.85 lakh).
But with Section 54: If Anita buys a Bangalore house for ₹1.45 crore or more, her entire capital gain (under Method 2) is exempt. Tax = ₹0.
Action plan:
- Apply for Lower TDS Certificate (Form 13) before selling
- Complete the sale
- If she can’t buy the Bangalore house before ITR filing deadline, deposit ₹1.45 crore (or the full gain) in NRCGAS
- Find and buy property within 2 years
- File ITR claiming Section 54 exemption
Scenario 2: NRI Sells Inherited Land, No Other House Owned
Situation: Rajesh (UAE NRI) inherited agricultural land from his father. He sells the land for ₹80 lakh.
His cost basis (indexed from father’s acquisition in 1995) works out to ₹15 lakh. LTCG = ₹65 lakh. Rajesh does not own any house in India.
Since the asset sold is land (not a residential house), Section 54F applies.
To get full exemption, Rajesh must invest the entire net sale consideration (₹80 lakh) in a residential house.
If he invests ₹80 lakh in a house: Exemption = ₹65 lakh x (₹80 lakh / ₹80 lakh) = ₹65 lakh. Full exemption. Tax = ₹0.
If he invests only ₹50 lakh: Exemption = ₹65 lakh x (₹50 lakh / ₹80 lakh) = ₹40.63 lakh. Taxable gain = ₹24.37 lakh.
Key point for Rajesh: Since he’s a UAE NRI, there’s no income tax in the UAE. The India-UAE DTAA doesn’t complicate things for real estate capital gains. He saves ₹8+ lakh in tax by investing the full amount in a house.
Scenario 3: NRI Sells Shares and Gold, Wants to Buy House
Situation: Priya (Canada NRI) sells Indian equity shares worth ₹50 lakh (LTCG of ₹15 lakh) and gold jewelry worth ₹30 lakh (LTCG of ₹20 lakh). She wants to buy a flat in Hyderabad.
Both assets are “not residential house” – Section 54F applies.
Important: For listed equity shares, LTCG up to ₹1.25 lakh is already exempt under Section 112A. Only the excess is taxable. But Section 54F can cover the taxable portion.
Priya doesn’t own any other house in India. She buys a flat for ₹75 lakh.
For the shares: Exemption = ₹15 lakh x (Amount invested from share sale proceeds / ₹50 lakh net consideration from shares)
For the gold: Exemption = ₹20 lakh x (Amount invested from gold sale proceeds / ₹30 lakh net consideration from gold)
The calculation gets proportionate based on how much of each sale’s proceeds she channels into the house.
This is complex enough to warrant a good CA.
The principle is clear – the more of the sale consideration you invest in the house, the more exemption you get.
Scenario 4: NRI Sells Property but Can’t Buy Within ITR Deadline
Situation: Suresh (UK NRI) sells his Chennai flat on October 15, 2025. Capital gain = ₹35 lakh. He wants to buy a new house but hasn’t found one by July 31, 2026 (ITR filing deadline for FY 2025-26).
Solution: Before July 31, 2026, Suresh deposits ₹35 lakh in a Non-Resident CGAS account. He claims Section 54 exemption in his ITR for FY 2025-26.
He then has until October 15, 2027 (2 years from sale) to purchase a house, or until October 15, 2028 (3 years from sale) to complete construction.
When he finds and buys the house, he withdraws from CGAS using Form C and completes the purchase.
If he doesn’t buy within the deadline, the ₹35 lakh becomes taxable as LTCG in the year the deadline expires.
Step-by-Step: How NRIs Can Claim Section 54/54F
Here’s the complete process.
Before the sale:
- Calculate your estimated capital gain
- Decide whether to claim Section 54, 54F, or 54EC
- Apply for a Lower TDS Certificate (Form 13) to reduce excess TDS
- Ensure your PAN card is active and linked
At the time of sale:
5. Complete the sale transaction
6. Buyer deducts TDS (at regular rate or lower rate per your certificate)
7. Collect all sale documents (sale deed, TDS certificates, transfer expenses)
After the sale:
8. If you’ve already bought the new house: Gather purchase documents
9. If you haven’t bought yet: Open NRCGAS account and deposit funds before ITR filing deadline
10. File ITR (ITR-2 or ITR-3) with the Capital Gains schedule filled correctly 11. Claim the exemption under the relevant section
12. Declare CGAS deposit details if applicable
After filing:
13. Complete the property purchase/construction within the allowed timeframe
14. Withdraw CGAS funds using the proper forms
15. Do NOT sell the new property for 3 years
16. Keep all documents safe for at least 7 years
Documents NRIs Should Keep
For claiming Section 54/54F, maintain these records:
For the old property/asset sold:
- Original purchase deed or acquisition documents
- Sale deed
- TDS certificate (Form 16A or 26AS/AIS record)
- Transfer expense receipts (brokerage, legal fees)
- Form 13 certificate (if obtained)
For the new property purchased:
- Purchase deed/sale agreement
- Payment receipts and bank statements
- Stamp duty and registration receipts
- CGAS deposit receipts (if applicable)
For ITR filing:
- Capital gains computation
- ITR acknowledgment
- Form 15CA/15CB if repatriating funds
Pro tip from community: Create a single folder (digital or physical) titled “Capital Gains – [Year]” and keep everything together.
When the IT Department asks questions 3 years later, you’ll thank yourself.
Common Mistakes NRIs Make
From years of watching community members navigate this:
1. Confusing “capital gain” with “sale consideration” in Section 54F
Under 54F, you must invest the FULL sale consideration for full exemption. Investing only the capital gain amount gives you only proportionate exemption. This is the #1 mistake.
2. Missing the CGAS deposit deadline
If you haven’t bought the new house by your ITR filing due date (July 31), you MUST deposit in CGAS. Miss this, and the exemption is gone. No second chances.
3. Not applying for Lower TDS Certificate
Without Form 13, the buyer deducts TDS on the full sale price. You’ll get it back as a refund, but that takes 6-12 months. Meanwhile, your cash is locked up.
4. Buying property outside India
Section 54 and 54F both require the new house to be in India. Buying a house in Dubai, the US, or anywhere else does NOT qualify.
5. Owning multiple houses when claiming 54F
If you already own two residential houses in India on the date you sell the non-house asset, you cannot claim 54F. Check your property ownership carefully.
6. Selling the new house within 3 years
If you sell the newly purchased house within 3 years, the exemption is reversed. The original capital gain becomes taxable. Plan to hold the property for at least 3 years.
7. Not updating residential status with the bank
NRIs need a Non-Resident CGAS account. If your bank doesn’t know you’re an NRI, they might open a regular CGAS. This creates compliance issues later.
8. Ignoring the 60-day CGAS withdrawal rule
When you withdraw from CGAS to buy property, the money must be used within 60 days. Don’t withdraw until you’re ready to make the payment.
9. Not factoring in dual-country tax implications
Section 54/54F saves you tax in India. But if you’re a US tax resident, the US doesn’t recognize these Indian exemptions. The capital gain may still be taxable in the US (with credit for Indian taxes paid via DTAA).
10. Using the wrong section
Sold a house? Use Section 54. Sold shares or land? Use Section 54F. Using the wrong section means your exemption claim gets rejected.
Special Situations
Joint Property Sale
If an NRI co-owns property with a spouse or sibling and they sell it together, each co-owner can claim Section 54/54F on their share of the capital gain, provided each reinvests in a qualifying property.
Both co-owners can invest in the same new property (co-owned), and each claims exemption proportionate to their investment.
Under-Construction Property
Buying an under-construction flat qualifies for Section 54/54F, but the construction must be completed within 3 years of the original sale date. “Completed” typically means possession received.
Many NRIs buy under-construction property and then face delays. If the builder delays beyond 3 years, your exemption is at risk. Choose builders with a strong track record.
Inheriting and Selling Property
If you inherited property and sell it, the cost of acquisition is what the previous owner paid (with indexation from the year they bought it, or from 2001-02 if bought before). Section 54 applies if it’s a residential house; Section 54F if it’s another type of asset.
NRI Status Change During the Period
If you sell property as an NRI but return to India and become resident before buying the new house, the exemption still holds. The status at the time of SALE determines which rules apply.
Using Loan to Buy New Property
You can use a housing loan to buy the new property and still claim the exemption. The entire investment amount (including the loan-funded portion) counts toward the exemption calculation.
This means even if you don’t have the full capital gain in cash, you can borrow to buy a more expensive house and still claim the full exemption. Many NRIs considering home loans in India use this strategy.
When Section 54/54F May NOT Be the Best Strategy
These sections aren’t always the right move. Consider alternatives if:
You don’t actually want to buy property in India.
Don’t buy a house just to save tax. Factor in maintenance, tenant management, and property management costs – especially from abroad. Sometimes paying the 12.5% tax is simpler.
Your capital gain is small.
If the gain is ₹5-10 lakh, the tax at 12.5% is ₹62,500 – ₹1.25 lakh. The hassle of CGAS, finding property, and compliance may not be worth it.
You’re already over-invested in Indian real estate.
If 70% of your net worth is already in Indian property, buying another house just for tax saving increases concentration risk. Consider diversifying your investments.
54EC bonds work better for you.
If your gain is under ₹50 lakh and you want simplicity, 54EC bonds are straightforward. Lower returns, but zero property management headaches.
Quick FAQ
Q: Can NRIs claim Section 54 and 54F?
Yes. Both sections are available to NRIs who are individuals or HUFs.
Q: Must the new property be in India?
Yes. The new residential house must be located in India. Property purchased abroad does not qualify.
Q: Can I claim both Section 54 and Section 54F in the same year?
Yes, if you have gains from different types of assets. For example, if you sold a house (Section 54 applies) AND sold gold (Section 54F applies), you can claim both – but you need to buy separate qualifying properties for each, or the same property may satisfy both if conditions are met. Consult a CA for combined claims.
Q: What if I don’t find a property within 2 years?
Deposit the amount in CGAS before your ITR filing deadline. This preserves your exemption while you search. But you MUST buy within 2 years (purchase) or 3 years (construction) of the sale date.
Q: Is CGAS interest taxable?
Yes. Interest earned on CGAS deposits is taxable as “Income from Other Sources.”
Q: Can I buy an under-construction property?
Yes, but construction must be completed (possession received) within 3 years of the sale date. Builder delays can put your exemption at risk.
Q: What if the buyer doesn’t deduct TDS?
The buyer is legally obligated to deduct TDS on NRI property sales. If they don’t, they face penalties. As the seller, ensure TDS compliance is built into the sale agreement.
Q: Can I use Section 54 for a plot of land?
No. Section 54 requires the new asset to be a “residential house,” not a plot. However, you can buy a plot and construct a house within 3 years.
Q: Does this apply to commercial property sales?
Selling commercial property generates capital gains that qualify under Section 54F (not 54, since it’s not a residential house). Reinvest in a residential house for exemption.
Q: What about NRIs who are US citizens or green card holders?
You can claim Section 54/54F in India. But the US taxes worldwide income and doesn’t recognize Indian exemptions. You’ll need to report the gain on your US return and use Foreign Tax Credit (Form 1116) for any Indian taxes paid. The India-US DTAA helps avoid full double taxation.
Q: Can I claim Section 54 if I sell property and my spouse buys the new house?
The exemption is for the person who sold the property and earned the capital gain. If the new house is in your spouse’s name alone and you didn’t invest, the claim can be challenged. Ideally, the new house should be in your name or joint names.
Key Resources
- Income Tax Act Sections 54, 54F: incometaxindia.gov.in
- Capital Gains Account Scheme Rules: Ministry of Finance notification
- Form 13 (Lower TDS Certificate): incometax.gov.in under “Non-Resident” services
- CGAS Authorized Banks List: Updated list on IT Department website
Disclaimer: This guide is for informational purposes only and does not constitute tax, legal, or financial advice. Tax laws are complex and individual situations vary significantly. Always consult a qualified Chartered Accountant or tax professional for advice specific to your situation. Information is current as of early 2026 and subject to change with future Finance Act amendments.
If you’re planning your move back to India and dealing with property, taxes, or any part of the transition, join our WhatsApp community at https://backtoindia.com/groups – 20,000+ NRIs helping each other with real, lived experience. It’s free and volunteer-run.
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