LTCG on property sale

The taxpayer can still claim the Section 54 exemption even if the builder's timeline is 4 years. Indian courts have repeatedly ruled that if a taxpayer invests the capital gains into an under-construction property and the delay in completion is entirely the builder's fault (beyond the taxpayer's control), the exemption cannot be denied. The taxpayer must ensure any unutilized funds are parked in a Capital Gains Account Scheme (CGAS) before the ITR due date and maintain all documentation to prove the bona fide investment.

Thank you sir.. not a delay but the timeline itself is 4 years for possession. And as I understand the aim of the buyer must be to transfer the "gained amount" from CGAS account to the builder within stipulated 3 year duration to ensure compliance. Please help me correct my understanding here.

Yes, you have made a good point. If the 4-year possession period was predetermined by agreement and not the builder's delay, then Section 54 seems more questionable because the usual period for purchase is within 1 year pre-sale or 2 years post-sale, whereas the period for building is 3 years.

I would not just consider merely not withdrawing it from CGAS and paying off the builder after three years would automatically keep the exemption alive for you. A CA/tax advocate should ideally be shown your agreement, payment schedule and possession terms before you sell the property.

The LTCG that my father makes may just be about 7-8 lakhs which can easily go to builders payment schedule in 1 installment post agreement signin. so that amount is not the real deal but the thought of possession in 2030 which is 4 years from now.

you cannot claim exemption if the new property’s construction takes longer than 3 years. The law is strict on timelines:

• Purchase → within 2 years from sale.

• Construction → within 3 years from sale.

If the builder delivers after 4 years, the exemption technically lapses, and the capital gains become taxable.

That said, there are two practical angles:

• Capital Gains Account Scheme lets you park funds until the 3‑year deadline. But if construction isn’t complete by then, the balance is taxed.

• Court rulings: Some High Courts have allowed relief when delay was due to the builder, not the taxpayer. But this is not guaranteed — it often requires litigation.

So the short answer is: No, you can’t rely on Section 54 exemption for a 4‑year project unless you’re prepared to fight it out in appeal or court.

Section 54 sets a 3-year outer limit for construction, but courts draw a clear line between builder-caused delay and taxpayer-caused delay.

If the father has paid the purchase amount before the return due date or within the 2-year window, and has proof the 4-year timeline was the builder schedule from day one (allotment letter, construction agreement), the Bombay HC (CIT vs. Bharatkumar Manubhai Bhatt) and Delhi HC have upheld the Section 54 exemption. The reasoning: Section 54 penalizes those who fail to reinvest, not those who are ready but face builder delays beyond their control.

Practical steps before filing:
1. Deposit the capital gain in a CGAS account before 31 August 2026 (ITR-3/ITR-4 non-audit due date)
2. Get a builder letter citing the 4-year delivery timeline and reasons for the schedule
3. Claim Section 54 in ITR-2/ITR-3 under Schedule CG, Section D (Part D1), with CGAS account details entered
4. Keep all payment receipts, allotment letter, and construction agreement in one tax file

Not depositing in CGAS when construction is incomplete is the most common reason the exemption gets disallowed at scrutiny.

Tax rate: 12.5% LTCG without indexation for property sold after July 23, 2024, or 20% with indexation for earlier acquisitions (ITR utility lets you pick the lower).

For the full Section 54 conditions and CGAS process, see this [property capital gains guide](https://taxgarden.in/blog/tax-on-sale-of-property-india-capital-gains-seller-guide-ay-2026-27).

Thank you. My fathers expected capital again after factoring indexation would be at max about 7 to 8 lakhs which I think will be transferred among the first 2-3 payments made to the builder in the construction linked payment scheme. We will do it from the CGAS account as a proof of transferring the gains before the period lapses for section 54 while entire apartment complex woul take total 4 years to complete as per the schedule. Please suggest if my understanding is correct.

Section 54 relief may still be available, but the answer depends on the dates and the project’s status. For a residential house sold by an individual or HUF, the new house generally must be purchased within 1 year before or 2 years after the sale, or constructed within 3 years after the sale. A flat booked in an under-construction project may be treated as construction, but a promised completion date in 2030 does not, by itself, establish that the statutory period is satisfied.

• If the sale has not yet taken place, check whether the builder can complete and hand over the house within 3 years of the transfer date. The relevant dates and the nature of the booking/allotment arrangement matter.
• If the deadline may be missed, consider the Capital Gains Account Scheme before the return-filing due date under section 139(1), for any eligible amount not used by then. This does not extend the section 54 time limit.
• If the builder’s delay is beyond your father’s control, courts have in some cases considered the facts sympathetically, but this is not a guaranteed exemption. Preserve the agreement, payment records, construction updates and evidence of follow-up.
• The amount eligible for exemption is generally linked to the capital gain invested, subject to the statutory rules—not simply the full sale proceeds. Confirm the sale date, ownership, asset type, gain and investment schedule before relying on the relief.

This issue fits into the sale-to-reinvestment workflow, where dates, cost and construction milestones need to be tracked together. Manual tracking across sale documents, builder updates and tax deadlines is difficult; automation can reduce repetitive work while keeping professional judgment in control. Our platform offers 2,000+ AI agents and 650+ integrations covering only relevant workflows. For a walkthrough tailored to your property-tax workflow, message us on WhatsApp at https://wa.me/message/3HVOZ7HIY4ESC1.