Quick answer: if you sell a residential house you have held long term and buy another home in India, Section 54 of the Income Tax Act can exempt the capital gain from tax – within time limits (buy up to 1 year before or 2 years after the sale, or construct within 3 years) and a cap of ₹10 crore of gains. For an under-construction home such as Godrej Bandra Bay, the completion date matters. Always plan the deal with your chartered accountant (CA).
Last updated: 29 October 2026. General information only, not tax advice. Tax rules change with each Budget – confirm every point with a qualified CA before you sell or book.
Many people buying a large home in Bandra West are upgrading: they sell a flat they have owned for years and put the money into a bigger one. That sale usually creates a large capital gain. Planned well, much of that gain can be reinvested without tax. Planned badly – wrong timing, wrong paperwork – it can mean a big tax bill. This guide explains the basics in plain English so you know what to ask your CA.
Capital Gains in One Minute
When you sell a property for more than you paid, the profit is a capital gain. If you held the property for more than 24 months, it is a long-term capital gain (LTCG). Section 54 applies only to long-term gains from selling a residential house.
Your CA will work out the exact gain, including any purchase and improvement costs, and the tax rate that applies to you.
Tax rate and the new Act. For transfers on or after 23 July 2024, long-term capital gains on property are generally taxed at 12.5% without indexation, plus surcharge and cess. Resident individuals and HUFs selling property bought before that date may be able to compare this with the old 20% rate with indexation and pay the lower tax. From 1 April 2026, the Income-tax Act, 2025 has replaced the 1961 Act and section numbers have changed – many people still call this relief “Section 54”, so ask your CA for the matching section under the new Act.
Section 54: The Key Conditions
| Condition | In simple terms |
|---|---|
| Who can claim | Individuals and HUFs (not companies or firms) |
| What you sell | A residential house held long term |
| What you buy | A residential house in India |
| Time to buy | Up to 1 year before or 2 years after the sale |
| Time to construct | Within 3 years of the sale |
| Exemption | Lower of the gain and the amount invested, capped at ₹10 crore |
| Lock-in | Do not sell the new house within 3 years |
The ₹10 Crore Cap and a ₹29 Cr* Home
Since 2023, the Section 54 exemption is limited to ₹10 crore of capital gains. If your gain is higher, the extra part is taxable even if you invest the full amount in a new home.
Godrej Bandra Bay is priced from ₹29 Cr*, so many buyers will invest far more than their capital gain. That is fine – the exemption simply depends on the gain (up to the cap), not on the price of the new home. Remember that the full cost of a new home also includes stamp duty, registration and GST – see our stamp duty and total cost guide.
Worked Example: Gain Above the ₹10 Crore Cap
| Step | Amount |
|---|---|
| Long-term capital gain on your old flat (example) | ₹12 Cr |
| Invested in a new home within the time limits | More than ₹12 Cr |
| Exempt under the residential-house relief (cap) | ₹10 Cr |
| Taxable gain | ₹2 Cr |
| Tax at 12.5% (before surcharge and cess) | ₹25 lakh |
Example figures only. Your CA will work out your actual gain, rate, surcharge and cess.
Buying an Under-Construction Home: Watch the Timeline
This is the point many buyers miss. When you book an under-construction flat from a developer, tax rules generally treat it like construction. That means the home usually needs to be completed within three years of your sale.
For Godrej Bandra Bay, possession is not yet confirmed and MahaRERA registration is awaited. If you plan to use Section 54 money for an under-construction home, ask your CA:
- What happens if possession comes later than three years after my sale?
- Should I time the sale of my old flat closer to possession?
- Would a ready-to-move home suit my tax plan better?
Our guide to under-construction vs ready-to-move flats in Bandra West covers the other pros and cons.
What Is the Capital Gains Account Scheme?
If you have not invested the gain by the time your income tax return is due, you can generally park the unused amount in the Capital Gains Account Scheme at an authorised bank. You then draw from it to pay for the new home within the time limits. If the money is not used in time, the unused part becomes taxable.
This is useful when you are paying a developer in stages over several years.
Common Mistakes to Avoid
- Selling too early for an under-construction home and missing the three-year window.
- Not depositing the unused gain in the Capital Gains Account Scheme before the return due date.
- Selling the new home within three years and losing the exemption.
- Buying in the wrong name – discuss with your CA if the new home will be in joint names or a family member’s name.
- Forgetting the cap – gains above ₹10 crore are taxable.
- Using a home loan without planning – how the purchase is funded can matter; ask your CA.
If the new home will be owned jointly, read our joint ownership guide before you book.
Sold Something Other Than a House?
If you sold shares, land or another non-residential long-term asset, a different section – Section 54F – may apply, with its own conditions. Ask your CA which one fits your case.
For NRIs
NRIs can also claim Section 54, but the buyer of their old flat must deduct TDS, and there are rules on moving money abroad. Read our NRI guide to buying a luxury home in Bandra West and work with a CA who handles NRI property sales.
A Simple Plan for Upgrading to Bandra West
- Get your CA to estimate the capital gain on your current home.
- Shortlist homes and check their RERA status and timelines – our RERA verification guide shows how.
- Visit the site with a checklist – see our site visit checklist for luxury flats.
- Decide the order: sell first, buy first, or do both close together.
- Plan funding – savings, sale money and, if needed, a loan (see our home loan guide).
- Keep every document: sale deed, purchase agreement, payment receipts and bank statements.
If you are moving from an older society flat, you may also be weighing a redevelopment offer against a new project – see redevelopment flat vs new developer project.
Sources and Official References
- Income Tax Department e-filing portal: the Income-tax Act, rules, forms and return filing.
- The Capital Gains Accounts Scheme, 1988 – deposits are accepted by authorised branches of public sector banks.
Tax law changes with each Budget. Confirm every point with a chartered accountant.
Where Godrej Bandra Bay Fits In
Godrej Bandra Bay at Bandra Reclamation offers 4 BHK homes only, approx. 2,900–3,500 sq ft* carpet, from ₹29 Cr*, in one tower of approx. 26 storeys*. Because possession is not confirmed, Section 54 buyers should be especially careful with timing. See the price and total cost guide and the latest project update.
Buyers comparing sea-front options also look at Adani Bandra Reclamation, and another summary of this project is on the Godrej Bandra Reclamation property page.
For the full picture, start at the Godrej Bandra Bay home page, read the complete Godrej Bandra Reclamation guide or visit the Godrej Bandra Reclamation project page.
Planning an upgrade to Bandra West? Send an enquiry for verified project details and timelines to share with your CA.
Frequently Asked Questions
What is Section 54 of the Income Tax Act?
Section 54 lets an individual or HUF save tax on long-term capital gains from selling a residential house, if the gain is reinvested in another residential house in India within set time limits.
How much time do I get to buy a new house under Section 54?
In general, you can buy the new house up to one year before or within two years after the sale, or construct one within three years of the sale. Your CA will confirm the dates for your case.
Is there a limit on the Section 54 exemption?
Yes. Since 2023 the exemption is capped at Rs 10 crore of capital gains. Gains above the cap are taxable. Check the current limit with your CA, because tax rules can change in each Budget.
Can I claim Section 54 on an under-construction flat?
Booking an under-construction flat is generally treated like construction, so the home usually has to be completed within three years of the sale. If possession is delayed beyond that, the claim can be questioned. Discuss the project timeline with your CA before booking.
What if I cannot invest the gain before filing my tax return?
You can generally deposit the unused amount in the Capital Gains Account Scheme at a bank before your return due date, and use it for the new home within the time limit.
Can I sell the new house soon after buying it?
If you sell the new house within three years of buying or completing it, the exemption you claimed is generally taken back and taxed. Plan to hold it for at least three years.
Does Section 54 apply to NRIs?
Yes, Section 54 is available to individuals including NRIs, but TDS on the sale and repatriation rules add extra steps. NRIs should take advice from a CA who handles NRI property cases.
*Prices, sizes and other details are indicative and subject to change. Please verify all details with the developer and on the MahaRERA website before making any decision.
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