This is a critical puzzle for anyone upgrading their home: timing the sale of the old property to perfectly meet the tax-saving deadline for the new, under-construction one. Get the timing wrong, and you wipe out all your Long-Term Capital Gains (LTCG) tax savings.
Also read |Â Labour Codes Target April 2026 Rollout; Draft Rules Imminent.
The situation is clear: a buyer has a new, expensive property coming in December 2028 (costing ₹3.34 crore) and an old house (purchased in 2009) to sell for around ₹1.8 crore.
Here is the breakdown of what the tax experts are saying, focusing on the strict, non-negotiable rules of Section 54.
Section 54: The 3-Year Time Bomb
Section 54 is your only shield here. It says if you sell a long-held residential house, the profits (the LTCG) are exempt from tax if you reinvest them in another residential property. But the conditions are brutal when construction is involved.
Also read |Â Labour Codes Target April 2026 Rollout; Draft Rules Imminent.
The Absolute Deadline
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The Rule: If you are constructing a new house—which applies to an under-construction property—the construction must be completed within three years from the date you sell your old property.
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The Critical Date: The new property finishes in December 2028. The buyer must ensure the sale of the old property happens after June 2026 (December 2028 minus three years).
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The Risk: Selling now would mean the three-year clock starts immediately. If the builder is even a little delayed, or if the December 2028 date slips to, say, January 2029, the entire Section 54 exemption is invalidated, and the full LTCG becomes taxable.
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The Advice: Wait until after June 2026 to sell the old house. This maximizes the window and significantly increases the chance of the construction being completed within the three-year limit.
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Also read |Â Labour Codes Target April 2026 Rollout; Draft Rules Imminent.
💰 The Financial Side: Tax vs. Loan
The LTCG Calculation Reality Check: The original gain on a 2009 property is a complex calculation now. While some estimate a small gain (e.g., ₹1.46 lakh), here’s the kicker: The government allows a seller of an old property to choose the best option: 20% tax rate with the full inflation benefit (indexation) OR the new 12.5% rate without indexation. For a property held since 2009, indexation is highly likely to make the final taxable gain much smaller, or even zero. The taxpayer must choose the beneficial method.
The thing is, since the cost of the new house (₹3.34 crore) is massively larger than any likely LTCG, the gain is likely to be fully tax-exempt anyway, provided the timeline is met.
The real headache is the financing and interest—not the tax.
The Logic: Home loan interest rates are typically lower than other loans… [Continue with the original text: “Experts are cautioning against throwing every single rupee of the ₹80 lakh savings…”]
Also read |Â Labour Codes Target April 2026 Rollout; Draft Rules Imminent.
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