Section 54 exmeption on under construction property booked before sale of original asset

1. Correct.
2. Yes, but deposit it before filing relevant ITR.
3. All the payments made from 1 year before to date of possession (within three years) are eligible for exemption u/s. 54 IT act.

Sir,

As usual, really appreciate your timely feed back on the query asked.

regarding the 3rd point, the  allotment letter received and  construction started in sep 2022 itself. So most of the significant payments had been made from sep 22 to aug 24. can we not claim the same then, as it is not within the time limit of one year before the sale date.  only sep 24 to possession date installment only can be claimed? Thanks in advance

Various other factors needs to be considered for the exemptions. Whether the agreement registerred in 2022 or yet to be registerred?

Sir,

Yet tobe registered.

Yes, she can claim Section 54 exemption as long as the new house is completed within 3 years from the date of sale (i.e., by August 2028). Since the possession is expected in July 2026, it is well within the time limit.

If the construction is not completed by then, the amount already paid towards the new flat can be considered, and the balance amount should be deposited in the Capital Gains Account Scheme (CGAS) before the due date of filing the return, to keep the exemption valid.

For Section 54, what matters is that the construction/possession is completed within 3 years from the sale date — the date of starting construction is not relevant.

Thank you so much for the reply 

Sir,

Registration of the same is not done yet, but instalements are being paid from Aug 2022

Sir,

What if it is yet tobe registered? Will it make any difference? Can she claim exemption?

Section 54 allows you to purchase the new property up to 1 year before the date of sale of the original house, so if you booked the under-construction flat within that 1-year window, the exemption is available. If the booking was earlier than 1 year before the sale, the exemption is technically not available for that property, but you may still claim it by investing the LTCG in another property within 2 years or constructing within 3 years from the sale date. The key is the registered sale deed date for the original property and the agreement/allotment date for the new one. This [capital gains exemption guide for Section 54, 54F and 54EC](https://taxgarden.in/blog/capital-gains-exemption-section-54-54f-54ec) covers the backward and forward purchase windows with examples.