Real Estate Magazine

CA Govind Chandak – Impact of Rs 10 Crore Capital Gains Deduction Cap on Luxury Property Sales and HNIs

How will the Rs 10 crore deduction limit on capital gains on reinvestment in residential properties affect HNIs and ultra-luxurious property sales?


The Finance Minister, Nirmala Sitharaman, recommended capping the deduction from capital gains on residential property investments under Sections 54 and 54F at Rs 10 crore in the budget. The new provision aims to prevent high-net-worth individuals from claiming huge deductions after purchasing very expensive residential houses.


Previously, there was no such limit, and typically, high-net-worth individuals would utilize this avenue to reduce their capital gains tax liability. However, the government proposed to curtail the benefits available under the provisions to the extent of Rs 10 crore to curb these practices.

Capital gains arising from the sale of long-term assets, including residential houses, are currently exempt from tax if the proceeds are invested in another residential property, and there is no cap on the amount on which the deduction could be obtained. However, under the new provisions, a cap of Rs 10 crore has been put on capital gains on which the deduction will be available. This means that if one sells a house and gains more than Rs 10 crore, the maximum benefit is only Rs 10 crore when invested in another property.


The move is likely to impact the sale of ultra-luxury properties in prime South Delhi, Mumbai, and farmhouses. It will also affect state revenues through property registrations. Major real estate consultants believe that the move would have no direct impact on primary luxury housing sales, but the resale luxury market would be affected.


Author Details

Name: CA Govind M Chandak

Email: [email protected]



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