Capital Gains When Selling Land: Sections 54B, 54EC and 54F (2026)

Which Act applies, and the section mapping

The Income-tax Act, 2025 replaced the Income-tax Act, 1961 for tax years starting 1 April 2026. Sellers still talk about "54B", "54EC" and "54F" because those were the 1961 numbers, and older transfers can still be assessed under the 1961 Act. For a sale in a tax year that falls under the new Act, read the new section numbers. This is the mapping we could read on the Department's website, matched by title and conditions:

We matched the rows by reading the 2025 Act pages for sections 82, 83, 85 and 86 and comparing their conditions with the earlier reliefs. We did not open an official correlation table, so use the numbers as a guide and check the current text with your chartered accountant. Where the 2025 Act sets a charge on unused money, the Department's pages refer to section 67 and to the return due date under section 263(1).

First question: is your land a capital asset at all?

Reinvestment reliefs only matter if the sale produces a taxable capital gain. The Department's FAQ on the taxability of capital gains from the sale of agricultural land says rural agricultural land is excluded from the definition of a capital asset, so its sale is not charged under the head capital gains. Urban agricultural land and non-agricultural land are charged. Under the earlier 1961 Act the test sits in section 2(14)(iii) and depends on the population of a nearby municipality or cantonment and on the aerial distance to it. We could not confirm the section number of this definition in the 2025 Act, so ask your adviser to check it against the current text.

Many farmers selling land near a growing town find that their land crossed into the "urban" test since they bought. Municipal limits and census figures change. Do the check before you assume the sale is exempt. Our guide to capital gains on land walks through that test and the 12.5% long-term rate in section 197.

Holding period matters as well. The Department's page on tax on short-term capital gains, which is on the 1961 Act as amended by the Finance Act, 2026, says land or a building held for not more than 24 months is short term, and that land is not covered by the special short-term rate for listed shares, so a short-term gain on land is taxed at normal slab rates. We could not confirm the 2025 Act section for the holding-period test. The reinvestment reliefs below are for long-term gains, with the 2025 Act sections 83 and 86 written for transfers of long-term assets or land used for agriculture.

Section 83 (earlier 54B): buying other agricultural land

As we read section 83 of the 2025 Act, it applies to an individual or a Hindu undivided family (HUF). The land sold must have been used for agriculture by the taxpayer, a parent, or the HUF in the two years before the transfer. Within two years after the transfer, the taxpayer must buy other land for agricultural use.

• If the gain is more than the cost of the new land, the excess is charged under section 67.
• If the gain is equal to or less than the cost of the new land, nothing is charged under section 67 for that gain.
• If the new land is transferred within three years of purchase, its cost is treated as nil (when the gain exceeded the cost) or reduced by the gain (when it did not), which pulls the earlier gain back into tax.
• If you have not bought the new land by the time you file your return, the unused amount must be deposited in a specified bank or institution under a notified scheme, before filing and no later than the due date under section 263(1), with proof attached to the return. Unused deposit is charged in the tax year in which two years from the transfer expire (section 83(4)), and you may withdraw it under the scheme.

Because rural agricultural land is outside capital gains, section 83 is mainly useful to sellers of urban agricultural land. See our page on agricultural land capital gains reliefs and, for the deposit step, the Capital Gains Account Scheme.

Section 85 (earlier 54EC): bonds instead of property

This is the route for sellers who do not want to buy another asset. As we read section 85, it applies when you have long-term capital gains from transferring land or a building (the original asset) and invest in a long-term specified asset:

• Time: within six months after the date of the transfer.
• Cap: investment out of gains from one or more original assets cannot exceed fifty lakh rupees, counted either in any tax year, or in the year of transfer and the next tax year as the section states.
• Which bonds: bonds redeemable after five years, 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.
• Lock-in: if the bond is transferred or converted into money within five years, the gain that was not charged becomes long-term capital gain in that year. A loan or advance against the bond counts as converting it into money.
• Double benefit: if you use an investment for this relief, you cannot also claim a deduction under section 123 for the same investment.

The Department's exemption page shows no deposit-account option for this relief, which is why the six-month clock matters. If the six months expire before your sale money is in the bank, plan for it. We did not read the current interest rate, issue dates or bond availability, and bonds may not always be open for subscription. Check with an authorised bond seller or the issuer.

Section 86 (earlier 54F): buying a house from sale of land

If you sell land that is a long-term capital asset and not a residential house, section 86 can give relief when you put the net consideration into one residential house in India. It applies to an individual or HUF. Here is what we read:

• Purchase window: one year before or two years after the transfer. Construction window: three years after the transfer.
• Net consideration means the full value received, less expenditure incurred wholly and exclusively for the transfer.
• Full relief if net consideration is no more than the cost of the new house; a proportionate share of the gain is not charged if net consideration is more.
• The relief is not available if, apart from the new house, you owned more than one residential house on the transfer date, or you buy another house within one year or build one within three years after the transfer, unless the income from that other house is chargeable as house property income.
• Any cost of the new house above ten crore rupees, and any net consideration above ten crore rupees, is disregarded for the calculation.
• If the new house is transferred within three years of purchase or construction, the exempted gain is charged as long-term capital gain in that year.
• Unused net consideration must be deposited in a specified bank or institution before filing and no later than the due date. Unused deposit is charged in the tax year in which three years from the transfer expire.

This relief is available for non-agricultural plots and urban agricultural land sold for a gain. For a farmer who wants a farmhouse, remember that a house on farmland may or may not qualify as a "residential house" for this relief. We could not confirm that point on an official page, so ask your adviser before relying on it.

Comparing the three reliefs

The cap and the lock-in in each section are the rules sellers most often miss. A seller who sells the new land or house early may have to pay the tax that was saved. We have not stated tax rates beyond the section 197 rate of 12.5% on long-term gains because the rate on any given sale depends on the date and on the taxpayer. A made-up example would not help, so ask for a calculation on your own numbers.

How to plan before you sign the sale deed

1. Confirm whether your land is rural or urban for tax purposes, and whether the gain is long term. If it is not a capital asset, no relief is needed.
2. Write down the date of transfer. Every deadline above runs from it. The sale deed date is the clear anchor; see the sale deed guide and agreement to sell vs sale deed.
3. Pick a relief that fits your plan. Want more farmland: section 83. Want no property: section 85. Want a home: section 86. You cannot use the same money twice.
4. Check the return due date. A deposit under the scheme must be made by it.
5. Keep the bond certificate, the new deed, the construction bills and the deposit receipt with your return papers.
6. Ask your chartered accountant to model the tax with and without the relief, including your other income.

Your buyer will also have tax duties. Read TDS on property purchase for the buyer side and how to sell agricultural land for the sale process. For the overall list of tax points that go with farmland, see tax benefits of agricultural land.

Common mistakes land sellers make

• Treating a rural agricultural sale as taxable and paying tax that was never due, or the reverse.
• Missing the six-month window for bonds because the sale money arrived late.
• Buying a second house that disqualifies the relief under section 86.
• Selling the new land, bond or house inside the lock-in period.
• Putting the deposit in an account at a branch that is not authorised under the scheme. See the Capital Gains Account Scheme page.
• Using the old section numbers on a return filed under the new Act.
• Taking a loan against the bond within five years, which counts as converting it into money.

Also remember that regular dealing in plots can move you from capital gains to business income. We could not confirm a single rule on where that line sits, so a seller who sells several plots a year should take specific advice.

What is unconfirmed

We could not confirm the 2025 Act section for the capital asset definition or for the holding-period test. We did not open the Finance Act, 2026, so later changes to rates, caps or lock-ins may not appear here. We did not read the Cost Inflation Index values or the exact rate for short-term gains on land. We could not confirm the scheme named in the deposit sub-sections of sections 83 and 86, and we did not read the form names, interest or withdrawal steps for the deposit. We also could not confirm bond availability or rates for section 85. Check each point on incometaxindia.gov.in before you rely on it.

Frequently Asked Questions

Sources

• Income Tax Department: Section 83, Income-tax Act, 2025
• Income Tax Department: Section 85, Income-tax Act, 2025
• Income Tax Department: Section 86, Income-tax Act, 2025
• Income Tax Department: Section 82, Income-tax Act, 2025
• Income Tax Department: Section 197, Income-tax Act, 2025
• Income Tax Department: Taxability of capital gain from sale of agricultural land (FAQ)
• Income Tax Department: Tax on short-term capital gains