Can I claim 54 exemption for an under-construction flat?

Yes - an under-construction flat counts as 'construction' for Section 54/54F, provided it completes within 3 years of your original property's transfer. Courts allow this even with some builder delay. Booking an under-construction flat is treated as 'construction', with a 3-year window from the original transfer Courts have allowed exemption despite builder delays, in genuine cases Keep the allotment letter, payment receipts and builder-buyer agreement as evidence Unspent money by the ITR due date must go into a CGAS account

What if my builder delays possession past 3 years?

Yes - an under-construction flat counts as 'construction' for Section 54/54F, provided it completes within 3 years of your original property's transfer. Courts allow this even with some builder delay. Booking an under-construction flat is treated as 'construction', with a 3-year window from the original transfer Courts have allowed exemption despite builder delays, in genuine cases Keep the allotment letter, payment receipts and builder-buyer agreement as evidence Unspent money by the ITR due date must go into a CGAS account

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Can I Claim Section 54/54F Exemption for an Under-Construction Flat?

Short answer: Yes - an under-construction flat counts as 'construction' for Section 54/54F, provided it completes within 3 years of your original property's transfer. Courts allow this even with some builder delay.

Law: Section 54/54F, Income-tax Act 1961 (Sections 82/86, Income-tax Act 2025) · Authority: CBDT · Status: in force · Checked 25 Sept 2026

What you need to know

Booking an under-construction flat is treated as 'construction', with a 3-year window from the original transfer
Courts have allowed exemption despite builder delays, in genuine cases
Keep the allotment letter, payment receipts and builder-buyer agreement as evidence
Unspent money by the ITR due date must go into a CGAS account

Who this applies to: sellers reinvesting in under-construction property, CAs

Official / primary source: incometaxindia.gov.in (government source)

The law behind it

Sections 54D, 54G, 54GA (1961) - Compulsory Acquisition & Industrial Relocation Exemptions

Three narrower exemptions for industrial property: 54D for compulsorily-acquired land/building, 54G for shifting out of an urban area, 54GA for shifting specifically into an SEZ. All three continue as Sections 84, 87 and 88 under the 2025 Act.

Sections 54D, 54G, 54GA, Income-tax Act 1961 (now Sections 84, 87, 88, Income-tax Act 2025) · in force · source

Section 82, Income-tax Act 2025 - Residential House Exemption (successor to Section 54)

Section 54's reinvestment exemption continues unchanged as Section 82 - same Rs 10 crore cap, same time windows, same CGAS requirement.

Section 82, Income-tax Act 2025 · in force · source

Sanjeev Lal v. CIT - Agreement-to-Sell Date Can Count for Section 54's Time Limit

Where litigation delayed the sale deed after an earlier agreement to sell, the Supreme Court took a practical view and let the earlier agreement date count for Section 54's 'one year before' window, so the taxpayer's earlier new-house purchase still qualified.

(2014) 365 ITR 389 (SC) · in force · source

Sanjeev Lal v CIT - agreement to sell date counts for Section 54 exemption

The Supreme Court held that when a seller signs an agreement to sell and hands over some rights in the property, that counts as part of the 'transfer' for capital-gains timing purposes - so the earlier agreement date (not just the later registered sale-deed date) can be used to satisfy the timelines for claiming a Section 54 exemption on buying a new house.

(2014) 365 ITR 389 (SC) · in force · source

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