Section 54F Focus Turns to Stamp Duty and Housing Timelines
Whether stamp duty counts towards the investment in a new house, and how the one-, two- and three-year windows work, came back into focus after an Upstox reader-query explainer on section 54F published on 13 August 2026. Two readers asked whether stamp duty and registration charges can be added to the cost of the new property, and whether a completed flat bought across three financial years (one year before and two years after the sale) still qualifies.
In the explainer, CA Abhishek Soni of Tax2win said that registration and stamp duty can be included in the cost of the new residential property for the exemption, and that for a ready property the window is linked to the date of sale, not to financial years. Mumbai-based tax expert Balwant Jain was also consulted.
Which law applies now
The explainer discusses section 54F of the Income-tax Act, 1961. From 1 April 2026 the Income-tax Act, 2025 applies, and the same relief is in section 86 of the Income-tax Act, 2025, titled "Capital gains on transfer of certain capital assets not to be charged in case of investment in residential house". For tax year 2026-27 onwards, claims should be framed under section 86. The core conditions carry over from section 54F.
What section 86 requires
- Who: only an individual or a Hindu undivided family.
- Original asset: any long-term capital asset other than a residential house, such as shares, mutual fund units, land, gold or a commercial property.
- New asset: one residential house in India.
- Relief: if the entire net consideration is invested, no capital gain is charged. If only part is invested, the gain is exempt in the ratio of the cost of the new asset to the net consideration.
- Net consideration: the full value of consideration received or accruing on transfer of the original asset, less expenditure incurred wholly and exclusively in connection with the transfer. It is the whole sale value, not only the gain, that must be invested for full relief.
- Cap: cost of the new asset above Rs 10 crore is ignored for sub-section (1), and net consideration above Rs 10 crore is ignored for the deposit rule in sub-section (2).
The one-, two- and three-year windows
| Route | Time allowed | Counted from |
|---|---|---|
| Purchase before sale | Within one year before | Date of transfer of the original asset |
| Purchase after sale | Within two years after | Date of transfer of the original asset |
| Construction | Within three years after | Date of transfer of the original asset |
Because every window runs from the date of transfer, a purchase can straddle financial years and still qualify. That supports the explainer's answer to the second reader.
Deposit if not invested before filing
Under section 86(2), if the net consideration is not used for purchase within one year before the transfer, or for purchase or construction before the return is filed under section 263, the unutilised amount must be deposited in a specified bank or institution under the scheme notified by the Central Government, before the due date of the return, with proof furnished. The amount used plus the amount deposited is treated as the cost of the new asset. If the deposit is not used within three years of the transfer, the proportionate exempted gain is charged under section 67 as income of the tax year in which the three years expire (section 86(4)).
Other-house conditions
Section 86(5) denies the relief if the assessee owns more than one residential house, other than the new asset, on the date of transfer; or buys another residential house, other than the new asset, within one year of the transfer; or constructs one within three years, where the income from such house is chargeable under "Income from house property". If another house is bought within two years or built within three years of the transfer, the gain earlier exempted is charged as long-term capital gains of that tax year (section 86(6)). If the new house itself is transferred within three years, the exempted gain is taxed in the year of that transfer (section 86(7)).
The stamp duty question
Section 86 speaks of the "cost of the new asset" and does not mention stamp duty. The inclusion of stamp duty and registration charges is therefore an interpretation, which the expert quoted in the explainer supports. Keep the property price, stamp duty and registration charges as separate, documented lines so the working can be defended if an officer takes a different view.
What to do now
- Record the exact date of transfer of the original asset and compute the three windows from it.
- Classify the new house as a ready purchase, an under-construction unit or self-construction, and keep the matching documents: agreement and registration for purchase; allotment, instalment schedule and possession letter for an under-construction flat; invoices and contractor records for self-construction.
- Tie every amount claimed as cost to a receipt and bank entry, with stamp duty shown separately.
- Check how many residential houses are owned on the transfer date before claiming.
- If any amount is not invested before filing, deposit it under the notified scheme before the return due date.
Updated on 28 September 2026: added section 86 of the Income-tax Act, 2025 as the current provision, with verified time limits, Rs 10 crore caps, deposit rule, other-house conditions and withdrawal events, and named the experts quoted in the explainer.
