Capital gains exemptions for NRIs in 2026: new house, bonds and the old Sections 54, 54EC and 54F

NRIs who sell long-term property in India can cut or wipe out the capital gains tax by reinvesting. The main routes are a residential house in India, or up to Rs 50 lakh in specified bonds within six months. The Income-tax Act, 2025 kept these exemptions and moved them to new section numbers.

All three exemptions apply only to long-term gains. For land and buildings, that means you held the property for more than 24 months.

The new section numbers

The 2025 Act took effect on 1 April 2026. For sales on or after that date, you claim under the new sections. The substance is largely unchanged.

What you reinvest in	2025 Act	1961 Act	Who can claim
A house, after selling a house	Section 82	Section 54	Individual or HUF
Specified bonds, after selling land or building	Section 85	Section 54EC	Any taxpayer
A house, after selling any other long-term asset	Section 86	Section 54F	Individual or HUF

None of these exemptions is limited to residents. An NRI qualifies on the same terms.

Selling a house and buying another (Section 82, old Section 54)

This applies when the asset you sell is a residential house whose income was taxed as house property.

You must buy one residential house in India within one year before or two years after the sale. Alternatively, you can construct one within three years after the sale.

How much is exempt. The exemption is the lower of the capital gain and the cost of the new house. If the house costs more than the gain, the whole gain is exempt.

Rs 10 crore cap. Any cost of the new house above Rs 10 crore is ignored. A gain of Rs 12 crore reinvested in a Rs 15 crore house gets an exemption of only Rs 10 crore.

Two houses, once. If the gain does not exceed Rs 2 crore, you can buy or build two houses in India instead of one. You can use this option only once.

Three-year hold. If you sell the new house within three years of buying or building it, the exemption is clawed back. When the gain on that later sale is worked out, the new house’s cost is reduced by the exempted gain, or treated as nil if the exempted gain was more than the cost.

Investing in bonds (Section 85, old Section 54EC)

This applies when you sell land, a building, or both, and the gain is long-term. It does not have to be a residential property.

You must invest within six months of the sale in a “long-term specified asset”. The Act defines this as a bond redeemable after five years and issued from 1 April 2018. The issuer must be NHAI, REC or another notified issuer. HUDCO bonds issued from 1 April 2025 were notified in April 2025.

In practice, bond distributors currently list issues from REC, PFC, IRFC and HUDCO. They pay 5.25% a year, with a face value of Rs 10,000 per bond and a minimum of two bonds. Check that the specific issue is notified before you invest.

Rs 50 lakh cap. The total you can invest from one or more sales is Rs 50 lakh. The cap covers the tax year of sale and the following tax year together.

Five-year lock-in. If you sell, transfer or convert the bonds into money within five years, the exempted gain becomes taxable in that year. Taking a loan against the bonds counts as converting them.

NRIs can invest. Distributor FAQs list NRIs as eligible investors. TDS applies to the interest paid to NRIs.

Selling something other than a house (Section 86, old Section 54F)

This covers long-term gains from any asset other than a residential house. For NRIs, that usually means a plot of land, a commercial unit or unlisted shares.

The time limits for the new house are the same as Section 82. The difference is that you must reinvest the net sale consideration, not just the gain. Net consideration is the full sale price less selling expenses.

How much is exempt. If you invest the whole net consideration, the full gain is exempt. If you invest only part, the exempt amount is:

Capital gain × (cost of new house ÷ net consideration)

Conditions. On the date of sale, you must not own more than one residential house other than the new one. You also must not buy another house within two years, or build one within three years, apart from the new one. Breaking these rules brings the exempted gain back to tax.

The Rs 10 crore cap applies to both the cost of the new house and the net consideration.

Does the new house have to be in India?

Yes. Sections 82 and 86 both require the new house to be in India. A home bought in London, Toronto or Dubai does not qualify, even if you live there.

The Capital Gains Account Scheme

You may not finish buying or building before your return is due. In that case, deposit the unused amount in a Capital Gains Account Scheme account before the return due date. For individuals without business income, that is 31 July after the end of the tax year.

The amount you have spent plus the amount deposited is treated as the cost of the new house. Attach proof of the deposit with your return.

If you do not use the deposit for the new house within the time limits, the unused part is taxed in the tax year in which three years from the date of sale end. You can then withdraw it.

NRIs can open these accounts at authorised banks, but only as NRO accounts. Withdrawals for the house need specified forms, and closing the account requires written approval from the tax officer.

Timelines at a glance

Exemption	Deadline to reinvest	Lock-in on new asset	Cap
House after house (S. 82 / old S. 54)	Buy: 1 year before to 2 years after sale. Build: within 3 years	3 years	New house cost above Rs 10 crore ignored
Bonds (S. 85 / old S. 54EC)	Within 6 months of sale	5 years	Rs 50 lakh
House after other asset (S. 86 / old S. 54F)	Buy: 1 year before to 2 years after sale. Build: within 3 years	3 years	Rs 10 crore on cost and net consideration
Capital Gains Account deposit	Before the return due date	Use within the 2-year (buy) or 3-year (build) window; unused part taxed when 3 years from the sale end	Follows the exemption claimed

Worked example: combining a house and bonds

Anjali lives in Singapore. In November 2026, she sells a flat in Mumbai for Rs 2,50,00,000. She bought it in 2013 for Rs 1,27,50,000 and pays Rs 2,50,000 in brokerage.

Her gain

Rs 2,50,00,000 − Rs 1,27,50,000 − Rs 2,50,000 = Rs 1,20,00,000

Tax if she claims nothing

Tax at 12.5%: Rs 15,00,000
Surcharge at 15% (income above Rs 1 crore): Rs 2,25,000
Cess at 4% on Rs 17,25,000: Rs 69,000
Total: Rs 17,94,000

Her reinvestment plan

April 2027: invests Rs 50,00,000 in REC bonds (within six months). Exempt under Section 85: Rs 50,00,000.
June 2028: buys a flat in Pune for Rs 70,00,000 (within two years). Exempt under Section 82: Rs 70,00,000.

Result

Total exempt: Rs 50,00,000 + Rs 70,00,000 = Rs 1,20,00,000
Taxable gain: nil
Tax saved: Rs 17,94,000

Her return for tax year 2026-27 is due before she buys the Pune flat. So she deposits Rs 70,00,000 in a Capital Gains Account by 31 July 2027 and claims the exemption in that return.

A Section 86 variation. Suppose Anjali had sold a plot instead, with the same gain and net consideration of Rs 2,47,50,000. If she bought a Rs 1,00,00,000 house, the exempt gain would be Rs 1,20,00,000 × (1,00,00,000 ÷ 2,47,50,000) = Rs 48,48,485.

The TDS problem

Reinvesting reduces your tax, but the buyer still deducts TDS on the full sale price. On Anjali’s sale, that would be Rs 2,50,00,000 × 14.95% = Rs 37,37,500.

To avoid this, apply for a lower or nil TDS certificate before the sale and include your reinvestment plan with proof. See our Form 128 guide. Otherwise, you claim the TDS back as a refund after filing.

Common mistakes

Buying the new house abroad. It must be in India.
Missing the six-month bond window. It runs from the date of sale, not the end of the tax year.
Investing over Rs 50 lakh in bonds. The excess gets no exemption.
Taking a loan against the bonds. That counts as cashing them in.
Selling the new house within three years. The old exemption is reversed.
Forgetting the Capital Gains Account deposit. Without it, an unspent amount cannot be counted when you file.
Using Section 86 while owning two other houses. The exemption is not available if you already own more than one other house.
Assuming exemptions stop TDS. They do not, unless you hold a lower deduction certificate.

Combining exemptions across years and owners can get complex. A chartered accountant can check the claim before you file.

What to do next

Model the tax with and without reinvestment using the property sale tax calculator.
Check your status for the year of sale with the residential status checker.
Read selling property in India as an NRI for TDS and repatriation.
Apply early for a lower TDS certificate on Form 128.
See what the Income-tax Act, 2025 changed for NRIs.

Sources

This guide explains the rules as they stood on 25 October 2026. It is general information, not tax, legal or financial advice. Rules change, and individual cases have exceptions, so confirm your position with a chartered accountant before acting. Spotted an error? Tell us and we will correct it.