Leaving a redevelopment: cash exits, resale and sections 54 and 54F

This is Part 3 of a four-part study of how income tax treats the existing occupants of a building that is redeveloped. Part 1 asks whether a member transfers anything, when, at what value, and what the new flat costs. Part 2 covers the money a member receives while the building is down: hardship compensation, corpus, transit rent and tax deducted at source. Part 3 covers leaving: cash exits, sale of the right to the new flat, early resale, and sections 54, 54F and 54EC. Part 4 covers tenants, slum dwellers, shops, companies, non-residents and the society itself. The developer’s side is in the developer series.

A member who stays in a redevelopment and moves back into a bigger flat may, on the continuation view the Mumbai Tribunal took in Rajesh Shamji Furia in July 2026, have no tax to pay until he sells; on the exchange view, taken by the same Tribunal in Dilip P. Ahuja in 2014 and assumed in most assessments, he transfers the old flat for the new one when the old flat goes, usually sheltered by section 54. A member who leaves has a transfer, a price and a computation on the day he goes; on that every authority agrees. Almost everything else is contested: what he sells when he leaves early, whether the stamp duty value can replace his price, whether a new flat sold two years later is a new asset or the old one in a new shape, and how sections 54 and 54F, written for people who sell one house and buy another, fit a house demolished and rebuilt on the same land by someone else.

The answers depend on when the member leaves. There are four exits. He can sell his old flat before the society signs anything, which is an ordinary sale. He can take cash from the developer instead of a new flat, which the Gujarat rules under section 41A of the Gujarat Ownership Flats Act, 1973 expressly allow. He can sell his right to the new flat while it is being built, which is a sale of something that is not yet a flat. Or he can take the new flat and sell it soon after possession, which raises the holding period question that Part 1 analyses.

Key points

• A cash exit is a transfer of the member’s flat for money. The gain is capital gains; section 50C applies only if the stamp duty value on the exit deed exceeds 110 per cent of the price; the developer deducts one per cent under section 194-IA, on the stamp duty value if higher for payments since the Finance Act, 2022.
• No decision traced treats any part of a cash buy-out as hardship compensation.
• A right to an under-construction flat is not land or building for section 50C on the Ahmedabad Tribunal’s view in Yasin Moosa Godil and two later Gujarat orders. Mumbai orders on development rights point the other way, and there is no High Court ruling.
• On the Tribunal decisions traced, the holding period of a redeveloped flat runs at least from the development agreement or allotment, not from possession; whether it runs from the original purchase is open.
• Whether a redeveloped flat is “constructed” for sections 54 and 54F, with a three-year window, turns on Circulars 471 and 672 and Hilla J.B. Wadia, against Rasiklal M. Parikh in the Bombay High Court.
• A member who claims section 54 on the new flat under the exchange view and sells it within three years loses the exemption through a reduced cost. Where the indexed computation decides the tax, the two views then arrive at the same figure.
• Section 54EC has been allowed on redevelopment cash for an old year, but from assessment year 2019-20 it needs land or building as the original asset, which sits uneasily with the argument that section 50C does not apply.

Selling the old flat before the development agreement

A sale before any agreement is signed is ordinary in law, but three features of a building about to be redeveloped matter.

The price carries a redevelopment premium. A buyer of a flat in an old building whose society already has seventy-five per cent consent under section 41A is paying for the new flat he expects. That premium is part of the seller’s full value of consideration, and it is why the jantri-based stamp duty value of the old flat is usually below the price, so that section 50C does not bite.

The rate. The old flat is long-term after twenty-four months, the threshold for land and buildings since assessment year 2018-19. A sale on or after 23 July 2024 is taxed at twelve and a half per cent without indexation, but because the old flat was acquired before that date, the second proviso to section 112(1)(a) caps the tax of a resident individual or Hindu undivided family at twenty per cent with indexation. Interest claimed as a deduction under section 24(b) or under Chapter VI-A is not part of cost (proviso to section 48(ii), inserted by the Finance Act, 2023 from assessment year 2024-25).

Year of transfer for a banakhat. Ahmedabad sales are often preceded by a banakhat with part payment. The Gujarat High Court held in Ushaben Jayantilal Sodhan v. ITO, Tax Appeal 393 of 2014, decided on 1 May 2018, at paragraph 18, that “to therefore hold that upon mere execution of an agreement to sale of the immovable property itself gets transferred into the purchaser, even within the extended definition of Section 2(47) of the Act, would be incorrect”, and the Ahmedabad Tribunal in ITO v. Arunaben Kaushikkumar Patel (ITA 2383 and 2485/Ahd/2016, 20 July 2022) taxed a legal heir in the year of the registered sale deed where her father’s banakhat of 2000 was not shown to have given possession. The member’s counter is Sanjeev Lal v. CIT (Supreme Court, 1 July 2014), where an agreement to sell followed by a court injunction against the sale deed was held to have created “some right … in favour of the vendee/transferee”, so a house bought within a year of the agreement qualified for section 54; Ushaben Sodhan (paragraphs 19 and 20) confined it to those “peculiar facts”. Outside such facts, the year of the registered deed normally starts every section 54 window.

Cash in lieu of a flat: the member who leaves at the deal

Rule 23 of the Gujarat Ownership Flats Rules, in its 2019 form, requires the development agreement to provide for “free alternative accommodation to the members till the redeveloped flat is handed over to the member, or cash in lieu of existing premises or any combination” (the Rules are quoted from a reproduced copy of the 2019 notification). In Mumbai the same thing happens by private arrangement.

What the member transfers, and why it matters

A cash exit is a transfer on any view. The member has sold, relinquished or extinguished his rights within section 2(47)(i) or (ii) (section 2(109)(a) and (b) of the 2025 Act). Even the continuation view in Furia depends on the member continuing to hold an ownership interest “substituted” into the new building, and the member who leaves does not continue. The gain is capital gains in the year of the exit.

The dispute is about which asset passes, because section 50C reaches only “a capital asset, being land or building or both”. If the member conveys his flat to the developer or its nominee by a registered deed, he transfers a flat with its interest in the land. The Mumbai Tribunal applied section 50C where owners handed their building and plot to a developer for demolition and redevelopment against cash and retained area, holding that “there is transfer of land and building” (Chiranjeev Lal Khanna v. ITO, ITA 6170/Mum/2008, April 2011, the order giving both 13 and 23 April; paragraphs 12.1 and 16). If instead he signs only a surrender of his rights under the development agreement, he will argue that he relinquished a right, relying on Yasin Moosa Godil and the Gujarat banakhat orders discussed below and, at society level, on ITO v. State Bank of India Staff Vaibhav Co-operative Housing Society, ITA 5324/Mum/2016, 19 June 2019, which held that section 50C does not reach “Rights in Development Agreement” (paragraph 8.4). The Revenue’s answer is Mrs. Arlette Rodrigues v. ITO, ITA 343/Mum/2010, 18 February 2011: “the provisions of section 50C are applicable when the rights to develop the property are transferred” (paragraph 17).

There is also a textual point. Section 50C takes the value adopted “for the purpose of payment of stamp duty in respect of such transfer”. If the surrender deed carries no stamp valuation of the flat, there is nothing to substitute. Whether section 50C reaches a society member’s cash exit has not been decided either way.

A partial exit is common. In Udayachal Goregaon Co-operative Housing Society Ltd. v. ITO (ITA 2814/Mum/2026, 10 September 2026; Part 4), two members, the occupants of one flat, entitled to 1,033 square feet in its place, took 710 and surrendered the remaining 323 square feet to the developer for Rs 29,07,000, which the Tribunal recorded as payable to them and not to the society. That is a cash exit for the surrendered area, with every question above, while the rest continues as their new flat. How the old flat’s cost and holding are divided between the part sold and the part kept has not been decided; Part 1 suggests an allocation by area or by stamp duty value at receipt, applied consistently.

Section 50C: the 110 per cent tolerance, the agreement date and the Valuation Officer

The tolerance. The third proviso to section 50C(1) deems the actual consideration to be the full value “where the value adopted or assessed or assessable by the stamp valuation authority does not exceed one hundred and ten per cent of the consideration”. A buy-out at Rs 1,10,00,000 against a stamp value of Rs 1,18,00,000 is within it; against Rs 1,25,00,000 it is not, and the whole stamp value replaces the price. Worked example 1 shows both.

The agreement date. The first proviso allows the stamp value on the date of the agreement fixing the consideration, but the second confines that to cases where some of the consideration was received by account payee cheque, draft or electronic mode “on or before the date of the agreement for transfer”. A member who fixes his exit price in the development agreement and executes the exit deed years later keeps the earlier value only if part of the price reached him through the bank by the agreement date. A token cheque at signing is worth insisting on.

The Valuation Officer. Section 50C(2) allows the Assessing Officer to refer the valuation to a Valuation Officer where the assessee “claims before any Assessing Officer” that the stamp value exceeds fair market value and the stamp value has not been disputed in any appeal, revision or reference under the stamp law; sub-section (3) caps the result at the stamp value. In Arlette Rodrigues the Tribunal held at paragraph 22 that, the assessee having objected, “the A.O. should have referred the matter to the DVO”. In Ila M. Parekh v. ITO, ITA 2634/Mum/2014, 19 February 2018, a co-tenant selling ownership premises received in a redevelopment displaced the stamp value because the stamp authority had valued the wrong area (paragraph 5).

Can part of the buy-out be hardship compensation?

A member who stays has the Mumbai line holding hardship compensation to be a capital receipt; in Ranjana Hemant Pendharkar v. ITO, ITA 7825/Mum/2025, pronounced on 25 March 2026, the Tribunal held at paragraph 11 that it “cannot be treated as consideration for transfer of any right in the immovable property”. A member who leaves will argue that the uniform hardship payment every member receives does not change character because he has chosen not to return, so that only the balance of his exit sum is the price of the flat.

The Revenue’s answer is that an exiting member is bought out, not displaced. In Pradyot B. Borkar v. ACIT, ITA 4070/Mum/2016, decided on 17 January 2020, the Tribunal held at paragraph 8 that sums received “only because of handing over the old flat for the purpose of re-development” were “integrally connected with the transfer of his old flat” and taxable as capital gains (at the assessee’s own instance, since he wanted section 54). Viren Vashi v. ITO, ITA 3830/Mum/2023, decided on 22 July 2024, which disregarded the label on a consent payment (“whatever nomenclature is given to the said sum of amount”, paragraph 6), helps the Revenue as much as the member: if labels do not matter, a buy-out partly labelled hardship is still a buy-out.

The member’s argument is strongest where the exit agreement pays the same hardship sum, under the same clause, as members who stay receive, and weakest where a lump sum is split only in the return.

Section 194-IA on the buy-out

A developer that buys out a resident member is “a transferee, responsible for paying … to a resident transferor any sum by way of consideration for transfer of any immovable property”, and section 194-IA(1) requires it to deduct “one per cent of such sum or the stamp duty value of such property, whichever is higher”. Deduction is excused only where the consideration and the stamp value “are both, less than fifty lakh rupees”. The proviso inserted by the Finance (No. 2) Act, 2024 with effect from 1 October 2024 aggregates the consideration “where there is more than one transferor or transferee”, so a jointly held flat is tested on the whole price. The stamp value limb, and the matching test in sub-section (2), were inserted by the Finance Act, 2022 (Act No. 6 of 2022); for a payment before it, deduction is on the price alone.

Because deduction is on the higher figure, a member who exits below the stamp value will see the stamp value reported as his consideration. That is not a finding that section 50C applies, and the return should say so. In Hiteshkumar Mohanlal Desai v. Assessment Unit (ITA 962/SRT/2025, 29 September 2026), a timing case on land given for development, discussed in Part 2, the Surat Bench deleted an addition built on the Rs 2,86,25,000 on which the developer had deducted tax in one year: the owner had received only Rs 25,00,000 that year, claimed only the matching credit, and offered the later receipts in the years he received them, as his co-owners had done with the Department’s acceptance (paragraphs 8 to 11). The figure in Form 26AS does not by itself fix the consideration.

Section 194-IC, which displaces section 194-IA for cash under a specified agreement, should not apply. A specified agreement pays the owner “in consideration of a share, being land or building or both in such project”, and the Kolkata Tribunal in ACIT v. Emami Realty Ltd., ITA 1457/Kol/2024, pronounced on 12 January 2026, upheld at paragraph 7.1 the Commissioner (Appeals)’ finding, quoted at paragraph 7, that “area sharing is a prerequisite”, on an unregistered agreement for cash alone (a slump sale of a project). For the same reason a cash exit is outside section 45(5A) altogether, and is taxed in the year of the exit, not of the completion certificate.

A non-resident member is paid subject to section 195, with no threshold. The developer’s side is in Part 2 of the developer series.

Selling the right to the new flat during construction

The commonest exit in a slow project is a sale of the member’s entitlement before the building is finished, by a tripartite agreement under which he assigns his rights against the developer to a buyer and the developer confirms the buyer as the person to whom the flat will be delivered.

Is the right “land or building” for section 50C?

In ITO v. Yasin Moosa Godil, ITA 2519/Ahd/2009, for assessment year 2006-07, pronounced on 13 April 2012, a Surat assessee had booked an under-construction flat in Byculla, Mumbai for Rs 15,99,000 and paid all but Rs 1 lakh, without possession or a registered agreement. By a registered tripartite agreement with the builder as confirming party he passed the flat to a new buyer and received back his booking amount. The Assessing Officer added Rs 41,45,255 under section 50C on the Sub-Registrar’s value of Rs 57,57,255; the Tribunal deleted it. At paragraph 13 it held that the appellant “only received back the booking advance paid by him to the builder, by relinquishing his booking right on the said flat”, and at paragraph 16 that “If the capital asset under transfer cannot be described as ‘land or building or both’ then section 50C will cease to apply.”

The Revenue’s appeal, admitted by the Gujarat High Court as Tax Appeal 743 of 2012 on whether the transfer of booking rights attracts section 50C, was disposed of on 10 February 2016 “as not pressed in the light of the Circular dated 10th December, 2015”, the Board’s monetary-limit circular. There is no High Court ruling on the merits.

Two later Ahmedabad orders applied the same reasoning to the Gujarat banakhat. In Smt. Devindraben I. Barot v. ITO, ITA 2220/Ahd/2012, pronounced on 6 May 2016, an assessee who passed on a registered banakhat for land in Vadaj without possession had “transferred only rights in the impugned land which cannot be equated to land or building or both” (paragraph 8). In Smt. Shyama Prakash Agarwal v. ITO, ITA 1601/Ahd/2012, pronounced on 17 March 2016, a confirming party to a sale of land she had agreed to buy received compensation “for relinquishment of his right to obtain a sale deed, which is also a ‘capital asset’ … but not akin to land or building” (paragraph 10).

Outside Gujarat, the Delhi Tribunal in Sushma Bajaj v. ACIT (ITA 1077/Del/2024, 19 February 2025, paragraph 5) and the Kolkata Tribunal in ITO v. Mahesh Kumar Singhania (HUF) (ITA 1387/Kol/2017, 25 October 2017, paragraph 6, a flat offered but never taken) held such rights outside section 50C.

The Revenue’s side. The strongest argument is the Departmental Representative’s in Yasin Moosa Godil itself (paragraph 9): the assessee had paid more than ninety per cent of the price and shown a “flat” in his balance sheet, so “it can very well be said that appellant had already purchased flat”. A redevelopment member is in a stronger version of that position: he paid for his old flat long ago, his entitlement is the consideration for surrendering a building he owned rather than a cancellable booking, and in Gujarat his agreement is registered and identifies the flat. The Revenue will add Arlette Rodrigues and Chiranjeev Lal Khanna, and the definition of immovable property, in section 269UA(d) of the 1961 Act (imported into section 2(47) for clauses (v) and (vi)) and now in section 2(109) of the 2025 Act, as including “any rights in or with respect to any land or any building or a part of a building … which is to be constructed”, arising among other ways “by way of becoming a member of, or acquiring shares in, a co-operative society”. The member has two answers in the same text. The definition is written for the transfer clause, and section 50C, and section 78 of the 2025 Act, still say “land or building or both”. And the rights limb excludes rights arising from “a transaction by way of sale, exchange or lease of such land, building or part of a building”, so on the exchange view, where the entitlement is what the member received in exchange for his old flat, he will say it is outside that limb. The Revenue will reply that the exclusion speaks of an exchange of the property in which the right subsists, and that the member’s right to a flat not yet built arises under the development agreement, an “agreement or arrangement” the limb expressly includes. It will also point to the first limb: by the Explanation to section 269UA(d)(i), land and buildings “include any rights therein”, and section 2(109) of the 2025 Act writes the same words into the definition itself, so that point is open to it under either Act.

The member’s answer. Deeming provisions are read strictly, and Parliament used wider words (“immovable property”, “any rights in”) where it meant them. But a member who argues continuation for his holding period and “mere right” for section 50C is arguing two things at once, and the Revenue will notice.

Where it stands. The Ahmedabad line has been applied three times and is likely to be followed there, but every case in it concerned booking or banakhat rights, not a member’s registered entitlement in exchange for his own demolished flat. A member selling mid-construction should argue that section 50C does not apply and, in the alternative, ask for a reference to the Valuation Officer.

The holding period of the right

If the member sells within twenty-four months of his agreement, the gain is long-term only if the old flat’s holding counts. Section 2(42A) tacks on a previous holding only in the cases its Explanation lists, which say nothing about an exchange or a redevelopment. On the continuation view the entitlement is the old asset in substituted form. Rajesh Shamji Furia v. ITO, ITA 1672/Mum/2026, pronounced on 16 July 2026, held at paragraph 10 that the permanent alternate accommodation agreement “cannot be regarded as the starting point for computing the period of holding”, and Urmila Jagdish Mehta v. ACIT, ITA 5944/Mum/2024, pronounced on 29 December 2025, held at paragraph 16 that the arrangement “was a continuation of ownership rights flowing from the original flat held since 1988”. Both concerned completed flats; the member will say the reasoning applies with more force to the entitlement that, on that view, replaced the old flat, and the Revenue that an unbuilt entitlement is the clearest case of a right distinct from the old flat.

On the exchange view the right is a fresh asset acquired when the entitlement crystallised, so a sale within twenty-four months is short-term, and its cost is the fair market value of what was given up for it (Sarjit Ghanshyam Desai v. ITO, ITA 1620/Mum/2026, 8 May 2026, a tenant case, paragraph 4.10). No order decides which view applies to a member who sells before possession. A member who must sell during construction is long-term on both views only if more than twenty-four months have passed since his own registered agreement as well as the development agreement; counting from the development agreement alone is enough only on the continuation view.

The “any other right” argument on cost

Since assessment year 2024-25, section 55(2)(a) gives “any other right” a nil cost unless it was bought, by the assessee or by a previous owner from whom it came by inheritance, gift, will, partition or another mode in section 49(1) (Finance Act, 2023, Act No. 8 of 2023; section 90(3) of the 2025 Act, ending “nil, in any other case”). The Revenue may say a member selling his entitlement sells a right he did not buy. The member’s answer is that the entitlement is his interest in the building in another form, costed under section 55(2)(b), or, on the exchange view, that he bought it with his old flat, so that the purchase limb and not the nil limb applies; the Revenue will answer, as it does for pagdi (Part 4), that a developer creating the right is not a “previous owner”. The nil-cost reading leads to the result Sarjit Desai rejected, that a member who surrendered a valuable asset holds a right with no cost. The Revenue will reply that “any other right” is residuary, that the list before it already includes tenancy rights, and that the words were inserted to end the no-cost cases (Part 4). The amended words have not yet been applied to a member’s entitlement.

Section 45(5A): the proviso for a member who sells before completion

If the member’s agreement is a specified agreement within section 45(5A), an open question discussed in Part 1, selling before completion engages the proviso: the sub-section “shall not apply where the assessee transfers his share in the project on or before the date of issue of the said certificate of completion”, the gain falls in the year of the sale, and “the provisions of this Act, other than the provisions of this sub-section, shall apply for the purpose of determination of full value of consideration”, which includes section 50C. The cost rule in section 49(7) does not apply to such a share.

Section 54F, not section 54, for the seller of a right

Section 54 relieves a gain on a residential house whose income is chargeable under the head house property. An entitlement to a flat not yet built is not one. Its seller’s relief is section 54F, for “any long-term capital asset, not being a residential house”. The Mumbai Tribunal took that route in DCIT v. Mrs. Kalpana Hansraj, ITA 2227/M/2013, pronounced on 17 April 2015, holding at paragraph 5 that an incomplete flat “could not be categorised as residential house” so section 54F was rightly allowed. (The Kolkata Tribunal allowed section 54 on relinquished allotments in DCIT v. Jennifer Chakraborty, ITA 400 and 514/Kol/2016, but that route is doubtful on the text.) Section 54F needs the whole net consideration invested for full relief and is barred if the member owns more than one other house on the date of transfer; worked example 2 shows how section 50C, by enlarging the net consideration, shrinks what a given reinvestment shelters.

The buyer’s position

The buyer’s holding runs from his own acquisition. In ITO v. Harsh Sandeep Thakore, ITA 1703/Mum/2024, pronounced on 19 May 2025, the Tribunal held at paragraph 10 that buyers of an allottee’s rights in 2008 “acquired the property only in the year 2008 and not in the year 2004”, the date of the original allotment.

A buyer who uses the entitlement as his own section 54 or 54F investment must decide whether he has purchased or constructed. On Circulars 471 and 672 and the Ahmedabad view in Parikh Amitkumar Mahendrabhai (paragraph 4.1), an allotment in an under-construction project is construction, giving three years from his own transfer for the flat to be completed; in Ashwin Chhotalal Paurana an outsider’s allotment qualified although registration came four years late. The Revenue will cite Rasiklal M. Parikh, where an allotment from a developer, not a society, conferred no title until a registered agreement; a buyer taking an assignment from a member is further from the society than the member was. Kishore Anand Shetty, which treated possession as the purchase date of an under-construction flat (paragraph 24), gives a second route if possession falls within two years after the buyer’s own sale. He should take a registered, developer-confirmed assignment and pay through the bank.

If he pays less than the stamp value he faces section 56(2)(x)(b)(B), which taxes the excess if it is more than the higher of Rs 50,000 and ten per cent of the consideration. “Property” there means “immovable property being land or building or both”, so his exposure turns on the same question as the seller’s. The first proviso, allowing the stamp value on an earlier agreement date where part of the price was paid through the bank by then, protects a buyer who struck the deal long before registration. The Mumbai Benches divide on whether an allotment letter is such an agreement (against, Vinit Ramnath Parkar v. ITO, ITA 9032/Mum/2025, 25 May 2026; for, Shashi Yogendra Raj Singhvi v. ITO, ITA 3022/Mum/2022, 21 March 2023), and the Surat Bench in Jagdishkumar Chhotubhai Gandhi v. ITO (ITA 245/SRT/2024, 29 September 2026, paragraph 27) held that it “constitutes an ‘Agreement’ for the purposes of Provisos to section 56(2)(vii)(b)”, the predecessor provision in the same terms. The buyer is also the transferee for section 194-IA; if the entitlement is a “building or part of a building” he deducts one per cent of the higher of price and stamp value.

Selling the new flat soon after possession

The Revenue’s position. The Revenue treats the old flat as transferred when it was handed over for demolition, and the new flat as a fresh asset held only from possession, so that a quick sale is short-term. The Departmental Representative put it that way in Bhupendra Chhaganlal Patel v. ITO (ITA 6516/Mum/2018, 9 December 2019, paragraph 11), and the Commissioner (Appeals) in Furia spoke of “two distinct taxable events”; the Tribunal in Bhupendra Patel remanded without deciding.

The Tribunal’s answer so far. Furia and Urmila Jagdish Mehta both held the redeveloped flat long-term, the first counting at least from the development agreement and the second from allotment and agreement, and both treated purchased extra area as taking the same holding period. Neither decided whether the holding runs from the original purchase. Both leaned on PCIT v. Vembu Vaidyanathan (Bombay High Court, 22 January 2019), a builder-allotment case and not a redevelopment case.

What it means in practice. A member who sells more than twenty-four months after his development agreement or registered member’s agreement is long-term on every view the Tribunal has taken. One who sells within twenty-four months of possession but long after the agreement is long-term on Furia and Urmila Mehta and short-term on the Revenue’s view. One whose agreement came at or near possession, as in Furia (agreement 12 January 2018, sale 20 January 2018), relies on continuation from the original purchase or the society’s development agreement. On any resale the buyer deducts one per cent under section 194-IA of the higher of the price and the stamp duty value where either is Rs 50 lakh or more, with the consideration aggregated across joint sellers from 1 October 2024; the Form 26AS entry records the sale, not the holding period or the cost, which the member must still prove.

The rate and the 23 July 2024 proviso. For a long-term sale on or after 23 July 2024, the twelve and a half per cent tax without indexation is capped for a resident individual or Hindu undivided family at twenty per cent with indexation if the flat was “acquired before the 23rd day of July, 2024”. On the continuation view it was acquired when the old flat was; on the exchange view, when the entitlement crystallised or on possession, and if that was after 23 July 2024 the protection is lost.

Clawback of an exemption already claimed. If the member claimed section 54 on the new flat at the time of the exchange, section 54(1) reduces its cost by the exempted gain, or to nil, if it is transferred “within a period of three years of its purchase or construction”. Section 54F(3) does the same for a section 54F claim by deeming the exempted gain to be income of the year of sale. Worked example 1 below shows the effect: on indexation, the reduced cost brings the exchange view back to the continuation result (to the rupee there, and within a rupee of rounding in Part 1’s example), but on the twelve and a half per cent computation it does not. Where the original exemption was claimed for a tax year beginning before 1 April 2026 and the flat is sold on or after that date, section 536(2)(h) of the 2025 Act plainly preserves a section 54F clawback, deeming the sum to be income of the year of the violation under the same head. For section 54 the clawback is a reduction in cost rather than a sum included in income, and the text does not say in terms that it survives. The Revenue will read section 536(2)(b), which saves any liability “incurred” under the repealed Act, with clause (h), and say that a member who took the exemption under the 1961 Act took it subject to its condition. The member will answer that clause (h) reaches only a sum required to be included in total income, and that no liability had been incurred under the 1961 Act before the sale for clause (b) to save. No decision on the point was traced.

Section 80C reversal. A member who claimed section 80C on instalments for the old or the new flat or on repayment of a loan taken for it faces section 80C(5), which deems all the deductions to be income of the year of sale if he “transfers the house property … before the expiry of five years from the end of the financial year in which possession of such property is obtained by him”.

Sections 54 and 54F: the member as transferor of the old flat

Section 54 relieves a long-term gain on a residential house, the income of which is chargeable under the head “Income from house property”, where the assessee “has within a period of one year before or two years after the date on which the transfer took place purchased, or has within a period of three years after that date constructed, one residential house in India”. Section 54F gives the same windows for a gain on any other long-term asset, with proportionate relief. Both are confined to individuals and Hindu undivided families. In the 2025 Act they are section 82 and section 86, with the windows unchanged.

For a member, these sections arise in three ways.

On the exchange view, against the new flat itself. If the redevelopment is a transfer of the old flat in exchange for the new one, the member has a gain, and the new flat is the obvious investment to set against it. The Mumbai Tribunal allowed section 54 on that footing in Dilip P. Ahuja (10 October 2014), Anil Dattaram Pitale (17 March 2025) said in passing that it would be available, and in ITO v. Divyesh Ramniklal Muni (ITA 2879/Mum/2025, 28 October 2025), relying on Hilla J.B. Wadia, the Tribunal upheld section 54 for the Rs 60,13,293 the member paid for 205 square feet of added area, without saying how much of his larger claim on the exchanged area was allowed. Part 1 sets out all three orders. On the continuation view, by contrast, there is nothing to exempt and section 54 is not engaged for the redeveloped flat at all.

On a cash exit or a sale of the right. The member who leaves has a gain and invests it in another house: section 54 if he sold the old flat (a residential house), section 54F if he sold an entitlement that is not yet a house.

As an investor. A member who sells another house, land or shares during his redevelopment may set the gain against what he pays for extra area, or for the new flat in a self-redevelopment, if that payment is an investment in purchasing or constructing a residential house within the windows.

Purchased or constructed: Circulars 471 and 672 and Hilla J.B. Wadia

The Board’s Circular 471 of 15 October 1986 dealt with the Delhi Development Authority’s Self-Financing Scheme. It records that “the allottee gets title to the property on the issuance of the allotment letter” and concludes that “the D.D.A. takes up the construction work on behalf of the allottee and that the transaction involved is not a sale”, so that such allotments “shall be treated as cases of construction for the purpose of capital gains”. Circular 672 of 16 December 1993 extended that treatment to “schemes of allotment and construction of flats/houses by the co-operative societies or other institutions” on similar terms, which “may also be treated as cases of construction for the purposes of sections 54 and 54F”.

The High Court authority closest to a redevelopment is CIT v. Mrs. Hilla J.B. Wadia, decided by the Bombay High Court on 2 March 1993 and reported in [1995] 216 ITR 376 (Bom). The assessee and her husband conveyed their Worli residence to a co-operative society formed to buy the property and build flats on it; she became a member, was allotted a flat in the building to be constructed and paid almost the whole cost within two years. The Court held at paragraph 8 that, where co-operative housing societies are formed in a city like Bombay to build flats allotted to members, “This must also be viewed as a method of constructing residential tenements”, and that “the material test in this connection is domain over the flat and investment in it”.

The Calcutta High Court reached the same result for a builder’s flat in CIT v. Smt. Bharati C. Kothari, decided on 6 March 2000 and reported in [2000] 244 ITR 352 (Cal), holding at paragraph 13 that “whether the assessee himself constructs the house or he gets it constructed by a contractor or a third party that does not make any difference”. The Mumbai Tribunal applied Circular 471, for the holding period of a buyer of a developer’s flat in a society redevelopment project, in Ashutosh Gurunath Haldipur v. ITO, ITA 5134/Mum/2014, pronounced on 8 November 2016, holding at paragraph 8 that “we do not see any reason why the said circular shall not be applicable to a private builder”, in an ex parte order of limited weight. The Ahmedabad Tribunal in Parikh Amitkumar Mahendrabhai v. DCIT, ITA 1199/Ahd/2025, pronounced on 9 October 2025, held at paragraph 4.1 that “allotment of flats in under-construction projects falls within the ambit of ‘construction’ for the purposes of section 54, and not mere ‘purchase’”, and at paragraph 4.2 that Circular 672’s rationale “applies equally to cases of private builders and cooperative societies”.

The Revenue’s best authority. Rasiklal M. Parikh v. ACIT, Income Tax Appeal 314 of 2013, decided by the Bombay High Court on 10 March 2017 (M.S. Sanklecha and A.K. Menon JJ), is the case the Department will cite. The assessee had surrendered a tenancy and booked three flats with a developer; the agreement under the Maharashtra Ownership Flats Act was executed more than three years after the surrender, when the developer had no approval for the floor. The Court held at paragraph 34 that he could “derive no benefit from the provisions of circular No.672” because he had to obtain the allotment from the developer “and not from the co-operative society”, and that “The allotment letter issued by the developer does not confer title until the agreement for sale under the provisions of the MOFA is registered.” The Supreme Court dismissed the special leave petitions on 20 November 2024 without reasons.

Rasiklal has to be set against Vembu Vaidyanathan, decided by the same Court two years later with M.S. Sanklecha J on both Benches, which applied the same circulars to a builder’s allotment for holding period without mentioning Rasiklal.

Where a redevelopment member stands against Rasiklal. A society member can distinguish Rasiklal on the very ground the Court gave. His entitlement does not come from a bare developer’s allotment under a booking. It comes from a development agreement to which the society is a party, under which the building is reconstructed on the society’s land for its members, which is Hilla Wadia’s facts in modern form and the “co-operative societies” limb of Circular 672. In Gujarat rule 23 requires the development agreement to provide for registration, so the title objection in Rasiklal paragraph 34 should not arise. The Ahmedabad Bench in Parikh Amitkumar (paragraph 4.3) did, however, insist that “execution and registration of a conveyance deed or construction agreement, together with reconciliation of payments, is indispensable”, which is a reason to make sure the member’s own agreement is registered and the payment trail complete.

The Revenue has a reply that the member must meet. Hilla Wadia’s test was “domain over the flat and investment in it” (paragraph 8), and Rasiklal distinguished Hilla because the assessee there had satisfied “the material test of having domain over the flat and having made an investment therein” (paragraph 33). Mrs. Wadia paid almost the whole cost of construction within two years; a member in a developer-led redevelopment pays nothing towards construction unless he buys extra area, and the Assessing Officer in Divyesh Ramniklal Muni denied section 54 because there was no purchase or construction. The member’s answer is that on the exchange view his investment is the old flat itself, whose value is both his consideration and the cost of the new flat. Where he also pays for extra area, Divyesh Muni shows the Tribunal accepting that payment as an investment in the new flat. No High Court has decided whether giving up the old flat is an investment in the new one for this purpose.

When construction hurts the member. In Farida A. Dungerpurwala v. ITO (ITA 5169/Mum/2010, 12 September 2014), a builder flat booked in 2002 and possessed in December 2004 could not be set against a sale in October 2005: booking a flat to be built “has to be considered as a case of ‘Construction of flat’”, and “the assessee has constructed a house prior to the date of transfer of original house” (paragraph 10). The Gujarat High Court in Shantaben P. Gandhi v. CIT, decided on 23 June 1980 and reported in [1981] 129 ITR 218 (Guj), is to the same effect: a house completed before the transfer is not constructed after it, and paying for it or taking possession at the time of the transfer is “a matter of no consequence” (paragraph 9). A member who has already taken possession of his redeveloped flat cannot match it against a later sale of another house as construction. He may argue purchase within one year before; Kishore Anand Shetty v. ITO, ITA 4974 and 4975/Mum/2025, 9 February 2026, treated possession as the purchase date of an under-construction flat (paragraph 24), but it did not cite Farida Dungerpurwala and the two sit uneasily together.

The three-year window in a delayed project

A member who claims section 54 on the exchange view, or who invests a gain from another house in his redeveloped flat, may find that the flat is not complete three years after the transfer.

For the member. The Madras High Court in CIT v. Shri Sardarmal Kothari, Tax Case (Appeal) 354 and 355 of 2008, decided on 17 June 2008, approved at paragraph 6 the view that “It is enough if the assessee establish that the assessee had invested the entire net consideration within the stipulated period”, though the houses there were substantially complete. Bharati Kothari treated full payment within three years as enough, and the Mumbai Tribunal followed it in ITO v. Shashanka Ghosh, ITA 6751/Mum/2016, order dated 4 October 2018 (paragraph 2.10). The most recent Mumbai order, Ashwin Chhotalal Paurana v. ITO, ITA 9066/Mum/2025, pronounced on 27 July 2026, allowed section 54F to an outside holder of land rights on a flat allotted to him in a slum redevelopment project where the registered agreement came about four years after the transfer, holding at paragraph 5.1 that “merely because the conveyance deed came to be executed at a later date, it cannot be held that the assessee had not acquired the new residential house pursuant to the allotment letter”.

The Ahmedabad Bench has taken the same line on builder delay. In Shri Sangram J. Patel v. DCIT, ITA 377/AHD/2018, pronounced on 25 October 2021, it held that the assessee “cannot be denied the benefit of exemption … on account of the delay on the part of the builder” (paragraph 12.2). In Dhillkushi Gurmurti v. ITO, ITA 2808/Ahd/2015, pronounced on 3 December 2018, it held that completion “is not compulsory within the specified time if the delay is attributable to the builder” (paragraph 8.3), though on an express concession that the assessee’s second investment, after the first builder failed, was late. ITO v. Anand Arvind Shah (ITA 2244/Ahd/2010, 28 December 2015, paragraph 5) and ITO v. Dilipbhai Ambalal Patel (ITA 135/Ahd/2014, 30 November 2017, paragraph 9) are to the same effect.

For the Revenue. Rasiklal is the anchor: an allotment with no registered agreement and no sanctioned floor within three years did not qualify. Two Gujarat Benches have since denied relief where title came years late. In DCIT v. Asodariya Gordhanbhai Ranchhodbhai (HUF), ITA 601/SRT/2023, pronounced on 29 December 2025, the Surat Bench held at paragraph 43 that legal title passed “only on 23.07.2024”, long after the sale of 29.08.2016 and beyond the outer limit “even if the case were to be viewed as one of ‘construction’”. In Hiteshbhai Mansukhbhai Bagdai v. ACIT, ITA 224/RJT/2022, pronounced on 8 May 2024, the Rajkot Bench denied section 54F because “the assessee failed to get the documents registered” where the land title was in litigation (paragraph 8). The Gujarat High Court in Ushaben Jayantilal Sodhan took the building use permission as the date construction was complete.

Reconciling them. The Gujarat orders against the assessee turned on unregistered documents, related-party builders and disputed title, and Asodariya did not discuss the circulars or Hilla Wadia. A society member with a registered agreement and a developer who is simply late is on the Sardarmal and Sangram Patel side, but in a five-year project he should expect the point to be taken and keep the agreements, permissions and the developer’s letters explaining the delay.

Investing another gain in the redevelopment

A member who puts another gain into his redeveloped flat, through extra area or a self-redevelopment contribution, faces the construction analysis above and three further points.

Money spent before the sale can count. In Anshul T. Bhimjyani v. PCIT, ITA 3373 and 3374/Mum/2018, pronounced on 31 December 2018, family members who had agreed in 2006 to redevelop a society’s building at their own cost in return for flats had spent Rs 40.5 crore by March 2013, almost 99 per cent of it before they sold another flat in November 2012, and claimed section 54 against their share of the construction cost. The Tribunal set aside a revision that would have counted only post-sale investment, applying C. Aryama Sundaram (Madras High Court) as quoted: “It is not a requisite of Section 54 that construction could not have commenced prior to the date of transfer of the asset resulting in capital gain”. The Principal Commissioner’s appeal to the Bombay High Court against the assessee (Income Tax Appeal 3098 of 2019) was withdrawn on 13 August 2025 on monetary limits, with the questions of law expressly kept open, so the point has no High Court ruling. The Ahmedabad Bench held the same in ACIT v. Subhash Sevaram Bhavnani, ITA 928/Ahd/2012, pronounced on 29 June 2012, for a Bodakdev house built mostly before the sale of a Usmanpura flat, because the date construction began is not material (paragraphs 5 and 6). The limit is Shantaben Gandhi: the construction must be completed after the transfer.

Money not spent by the return date must be deposited. Section 54(2) requires the unutilised gain to be deposited in the Capital Gains Accounts Scheme “before furnishing such return [such deposit being made in any case not later than the due date applicable in the case of the assessee for furnishing the return of income under sub-section (1) of section 139]”; section 54F(4) requires the same of the net consideration. Rasiklal (paragraph 31) held the section 54F deposit mandatory, and section 54(2) is in the same words. A member whose redeveloped flat or extra area will be paid for over several years must deposit what remains by the due date, or lose relief on it. Under section 54 the unutilised amount is taxed in the year in which three years from the transfer expire; under section 54F what is taxed in that year is the part of the exemption that the unutilised amount supported, worked out by re-running the proportion on the amount actually spent.

A refunded payment unwinds the claim. In Hasmukh N. Gala v. ITO, ITA 7512/Mum/2013, 19 August 2015, the Tribunal allowed section 54 on an allotment with full payment though the building was not complete, but said at paragraph 7.3 that “in case, if it is found that the advance has been returned, it would certainly call for forfeiture of the assessee’s claim under section 54”. Where a redevelopment stalls and the developer refunds what the member paid for extra area, the section 54 claim built on that payment falls away.

One house or two: counting under sections 54 and 54F

Two old flats for one new. A member who owned two flats and receives one combined flat has, on the exchange view, transferred two residential houses and invested in one. Section 54 does not limit the number of original assets. In Sanjeev Behl v. ITO, ITA 5345/Mum/2024, pronounced on 30 April 2025, two flats were sold on the same day with gains of Rs 20,41,836 and Rs 1,04,54,734 and a single new flat was bought; the Commissioner (Appeals) denied the exemption because two houses had been sold, and the Tribunal, following an earlier order of the same Tribunal, held that gains from more than one house may be invested in one, and directed the exemption of Rs 1,07,33,165 claimed against the one new flat (paragraphs 19 to 22). The cost of the new flat must cover both gains, and each gain keeps its own holding period.

One old flat for two new. Many redevelopments give a member two smaller flats for one large one, or a flat and a shop. From assessment year 2015-16, section 54 requires the assessee to have purchased or constructed “one residential house in India”; the words replaced “a residential house” by the Finance (No. 2) Act, 2014 with effect from 1 April 2015. The first proviso, inserted by Act No. 7 of 2019 (the Finance Act, 2019) with effect from 1 April 2020, allows two houses “where the amount of the capital gain does not exceed two crore rupees”, and the second makes that option available once, “for the same or any other assessment year”. A member who claims section 54 on two flats under the exchange view must either keep the gain within Rs 2 crore and spend his once-in-a-lifetime option on it, or argue that the two flats are one house.

For years before 2015-16 the Delhi High Court in CIT v. Gita Duggal (ITA 1237/2011, 21 February 2013) treated the basement and three floors received back after a builder rebuilt the owner’s house as “a residential house”, and the Mumbai Tribunal in Madhu B. Khatri v. ITO (ITA 6613/Mum/2019, 1 July 2021, paragraph 10) allowed section 54 on two flats on different floors received under a redevelopment agreement for assessment year 2013-14. The Delhi High Court later confined Gita Duggal in Mrs. Kamla Ajmera v. PCIT (ITA 246/2019, 3 December 2024), holding at paragraph 39 that “the word ‘a’ used in Section 54F of the Act denotes one singular residence” unless the units can be used as one, and noting at paragraph 38 that in Gita Duggal the owner’s house “was demolished and reconstructed by the builder”. For a current transfer, two flats are two houses unless they adjoin and can be used as one.

The section 54F ownership bar. The proviso to section 54F(1) denies the exemption where the assessee “owns more than one residential house, other than the new asset, on the date of transfer of the original asset”, or purchases another within one year or constructs another within three years after it, “and” the income from such other house is chargeable under the head house property. A member whose own flat has been demolished and is being rebuilt, and who also owns another residential house, then sells land or shares and invests in a further house, needs to know whether his flat under redevelopment counts as a house he “owns”: if it does, he owns two houses other than the new asset and the proviso bars the claim. A member whose only house is the flat under redevelopment is not caught by this limb in any event, because the bar needs more than one.

No decision holds that a flat under redevelopment is not a house owned. The nearest support is DCIT v. Aditya Harshvadan Mangaldas, ITA 299/Ahd/2025, pronounced by the Ahmedabad Tribunal on 11 December 2025, where two villas under construction on the date of sale were not counted because “the assessee was not in possession of these assets for occupation” (paragraph 7). The Delhi Tribunal took the same view of a house under construction in ACIT v. Mohinder Kumar Jain, ITA 5254/Del/2014, 4 August 2017 (paragraph 11), and in Adarsh Kumar v. DCIT, ITA 5331/Del/2015, 24 May 2018, held that allotted flats without possession did not trip the proviso because no income from them was chargeable under the head house property (paragraph 7). In Abhijit Avarsekar v. ACIT (ITA 750/Mum/2017, 9 August 2018), a penalty appeal, the argument that a flat “under redevelopment” was not owned was remanded without comment, and in Urmila Uttam Jhavar v. PCIT (ITA 208/Mum/2024, 10 May 2024, paragraph 5) a revision was upheld because a similar claim had not been verified.

The Revenue’s answer is that ownership does not depend on possession: the member still owns his interest in the land and his entitlement to an identified flat, and in Gujarat holds a registered agreement for it. The real risk lies in the construction limbs. When the redeveloped flat is completed within three years after the member’s sale of the other asset, the Revenue may say he has “constructed” a residential house other than the new asset within three years. That engages the proviso, clause (a)(iii), and, separately, section 54F(2), which taxes the exemption already allowed in the year the other house is constructed. Clause (b) of the proviso is satisfied whenever the income from that house is chargeable under the head house property, which it is even if he occupies it himself. Against the proviso, the member’s answer is in clause (b) itself: it excludes “the one residential house owned on the date of transfer of the original asset”, and if, as the Revenue says, he owned the flat under redevelopment on that date, the completed flat is that house rebuilt, not another house constructed. Section 54F(2) has no such carve-out, so against it he has only the second half of that argument. The member will say the Revenue cannot treat the same flat both as owned on the date of transfer and as newly constructed after it; the Revenue’s reply, on the exchange view, is that the completed flat is a new asset acquired for the old one, not the house owned on the date of transfer.

The Rs 10 crore cap, joint owners and the new house in a spouse’s name

The cap. The Finance Act, 2023 (Act No. 8 of 2023) inserted provisos to sections 54 and 54F with effect from 1 April 2024 under which, where the cost of the new asset exceeds Rs 10 crore, “the amount exceeding ten crore rupees shall not be taken into account”, and the deposit in the Capital Gains Accounts Scheme is capped at Rs 10 crore of gain (section 54) or net consideration (section 54F).

Joint owners. Where spouses or heirs own the old flat together, each co-owner is a separate assessee with his own share of the gain and his own exemption, and must satisfy the conditions personally.

A new house in the spouse’s name. The Delhi High Court has twice allowed section 54F where the new house was bought with the assessee’s money in the joint names of the assessee and his wife (CIT v. Ravinder Kumar Arora, ITA 1106 of 2011, 27 September 2011, paragraph 10) or in the wife’s sole name (CIT v. Shri Kamal Wahal, ITA 4/2013, 11 January 2013: “the new residential house need not be purchased by the assessee in his own name nor is it necessary that it should be purchased exclusively in his name”, paragraph 9). Kamal Wahal records at paragraph 6 a contrary Bombay High Court view, Prakash v. ITO, known only as noted there, so a member who puts extra area or another flat in his wife’s name should expect that view to be argued against him; Gujarat has no ruling. Where the gain was clubbed in the husband’s hands under section 64(1)(iv), the Mumbai Tribunal in Late Rajeshbhai Muljibhai Amin v. ACIT, ITA 8307/Mum/2025, 10 June 2026, held that “the corresponding benefit under section 54 of the Act attached to such capital gain must also be granted” (paragraph 21).

Section 54EC on a redevelopment exit

Section 54EC exempts a long-term gain where it “arises from the transfer of a long-term capital asset, being land or building or both” (the words “being land or building or both” were inserted by the Finance Act, 2018 with effect from 1 April 2019), to the extent invested within six months in long-term specified bonds, capped at Rs 50 lakh across the year of transfer and the next year. For bonds issued on or after 1 April 2018 the qualifying bonds are those of the National Highways Authority of India, the Rural Electrification Corporation or other notified issuers, redeemable after five years, and the exemption is reversed if they are transferred or converted into money within five years. Unlike sections 54 and 54F, it is not confined to individuals and Hindu undivided families.

The only order traced that directs section 54EC on redevelopment cash is Mrs. Sherlyn Dias (legal heir of late Mrs. Dorothy Lawrence Pereira) v. ITO, ITA 7107/Mum/2025, pronounced by the Mumbai Tribunal on 4 June 2026. The late Mrs. Pereira’s Rs 50 lakh share, one of four equal family shares of the cash under a 2010 development agreement for the family building, went into REC bonds; the Assessing Officer, accepting that section 50C did not apply to an agreement for development, taxed it as income from other sources. The Tribunal held it to be “consideration received on grant or transfer of development rights, being a capital asset” (paragraph 39) and directed section 54EC “subject to verification of fulfilment of statutory conditions” (paragraph 38). Section 54EC had also been allowed without dispute in Chiranjeev Lal Khanna and Gita Duggal, both also for years before the amendment.

Sherlyn Dias was decided for assessment year 2011-12, when section 54EC reached any long-term capital asset, so it did not need to decide whether development rights are land or building and is no authority on that point for a current exit. For any transfer from assessment year 2019-20 the condition applies, and the Assessing Officer’s finding in Sherlyn Dias that section 50C did not apply for want of a transfer of land or building shows the argument the Revenue will now run against section 54EC. That is the member’s dilemma in its sharpest form: a member who argues that he relinquished a right that is not land or building, to keep out of section 50C, will have difficulty saying that the same right is land or building for section 54EC. Where the stamp value is close to the price, the safer course is to accept that the flat is land or building, rely on the 110 per cent tolerance and the Valuation Officer, and claim section 54EC. Where it is far above the price, the member must choose.

Death, inheritance and partition during construction

Section 49(1)(iii)(a) gives an asset acquired “by succession, inheritance or devolution” the cost “for which the previous owner of the property acquired it”, and Explanation 1(i)(b) to section 2(42A) adds the previous owner’s holding period. The Bombay High Court held in CIT v. Manjula J. Shah, Income Tax Appeal 3378 of 2010, decided on 11 October 2011, a gift case reasoned on all the modes in section 49(1), that indexation for such an asset also runs from the year in which the previous owner first held it (paragraph 24). So an heir who sells his late father’s redeveloped flat, or the right to it, takes the father’s cost and holding.

What the heir does not get from the statute is an answer to the anterior question: did the heir inherit the old flat (the continuation view), or a fresh right the father had acquired in an exchange (the exchange view)? The difference decides the cost and the holding period. ITO v. Naresh Chellaram Gidwani, ITA 3794/Mum/2012, pronounced on 8 January 2014, applied Manjula Shah to a redeveloped flat allotted to the assessee’s mother for a flat his father bought in 1966, but the continuation question was neither raised nor decided.

If the member dies after a transfer of his old flat has taken place on the exchange view, the gain on it is his, assessed on his legal representatives, and his heirs inherit the right. If he dies before any transfer, the heirs inherit the old flat and any transfer is theirs. Each co-heir is a separate assessee who claims section 54 on his own share if he reinvests. In Narayan Devarajan Iyengar v. ITO (ITA 106/Mum/2023, 10 May 2023, paragraph 10) the Tribunal deleted an enhancement that would have taxed a non-resident nominee member on transit rent he had divided among his father’s ten children, but because transit rent is a capital receipt, without deciding whether the division was correct. A partition of a Hindu undivided family during construction is also a section 49(1) mode, with the same consequences. Whether an heir’s new flat is “acquired before the 23rd day of July, 2024” by reference to the deceased’s acquisition is arguable on Manjula Shah’s reasoning, but undecided.

The holdout who is made to leave

Section 41A of the Gujarat Act allows redevelopment on the consent of seventy-five per cent of the flat owners, and the Gujarat High Court has compelled holdouts to shift. In Sarojben Kiritbhai Shah v. Ahmedabad Municipal Corporation, Letters Patent Appeal 1075 of 2022, decided by a Division Bench on 23 January 2023, the Court held at paragraph 52 that “Temporary shifting of residents of a premises in redevelopment project would not amount to dispossession or eviction”, the resolution having provided rented alternate accommodation for all occupants at the developer’s cost.

Mumbai reaches the same result through arbitration. The developer seeks interim directions under section 9 of the Arbitration and Conciliation Act, 1996 against members who will not vacate. In Vaswani Projects Pvt. Ltd. v. Utsahi Maratha Mandal Co-operative Housing Society Ltd., Commercial Arbitration Petition (L) 16351 of 2026, decided on 3 July 2026, the Bombay High Court directed respondents 2 to 20, the occupants who had not vacated, to hand over vacant possession within two weeks of the developer’s written notice, subject to the developer first complying with clause 16.5 of the development agreement, with the Court Receiver to take possession on default. Answering the fear of some respondents, in disputes between rival owners and heirs, that signing would prejudice their title, it said at paragraph 44 that “Execution of a Permanent Alternate Accommodation Agreement or acceptance of transit rent, hardship compensation or similar benefits does not decide ownership or extinguish any legal right”, and clause (x) of its order says that acts done under the order do not “create, extinguish or finally determine” anyone’s proprietary, tenancy or possessory rights. A compelled Mumbai holdout, like a Gujarat one, is shifted, paid and re-housed. The observation was made to protect title disputes pending between claimants, not to characterise the member’s interest for tax, so it is at most indirect support for the continuation view in Part 1; the Revenue will say that a transfer under section 2(47) does not need a change of civil ownership.

Occupants of buildings under the Maharashtra Housing and Area Development Act can also be moved by the Board’s order. In Vasantha Narayan Poojari v. ITO (18 March 2026), discussed in Parts 1 and 4, the owner of premises run as a motor garage was directed by the competent authority to vacate on the terms of the developer’s offer, under section 95A of that Act according to the assessee’s submission recorded in the order (the section’s text has not been verified here). Having lost a writ challenge, he accepted the developer’s offer and vacated in March 2012, and the Tribunal, in an observation made after quashing the reopening, found that he “transferred the premises to the builder/developer in the year 2012 in terms with the offer letter dated 17.11.2011 of the builder” (paragraphs 10 and 11). The Revenue will use that date against a holdout who leaves under a statutory order, though the Tribunal rested it on his acceptance of the offer, not on the order alone. His answer is that eviction under a statute, without acceptance, is not possession given in part performance of a contract within section 53A, and that, as Sarojben Shah holds for compelled shifting in Gujarat, being moved is not dispossession or eviction; Vaswani Projects, an arbitration order confined to its own directions, offers only the indirect support described above. The Revenue will reply that where the occupant never accepts, a statutory order ending his occupation can still extinguish his rights within section 2(47)(ii) without any contract; that where, as in Poojari, the order directs him to leave on the terms of the developer’s offer, he leaves on the contract’s terms whether he signs or not, which weakens the distinction between eviction and part performance; and that Sarojben Shah decided what shifting is under the Gujarat Act, not whether a right was extinguished for tax. To the second point the holdout replies that section 53A needs a contract to transfer made “by writing signed by him or on his behalf”, which no order can supply; the Revenue’s stronger ground against him is extinguishment under clause (ii), which needs no contract.

No income-tax decision on a compelled holdout was traced. Three untested points follow from the courts’ characterisation. First, a holdout who keeps the same entitlements as consenting members (new flat, rent, hardship) should be taxed as they are. Second, a holdout who never signs a registered agreement cannot be within section 45(5A), which needs a registered specified agreement, or section 2(47)(v), which needs a contract within section 53A of the Transfer of Property Act; on the exchange view his transfer, if any, is on possession of the new flat or a later document. Third, a premium paid to a holdout above what other members receive has no decided treatment. The Revenue will say it is the price of his consent; the holdout will say that, like hardship, it compensates the disruption of his home. Viren Vashi, which treated a consent payment as hardship whatever its label, helps him, but it concerned a payment every member received.

Worked example 1: the member who takes cash against the member who stays and sells

The facts are illustrative. Two neighbours, A and B, each bought identical flats in an Ahmedabad society in 2004-05 for Rs 18,00,000. The society signs a registered development agreement under section 41A on 20 May 2021. Both are resident individuals whose other income uses up the basic exemption limit; tax is shown before surcharge and cess. Cost Inflation Index: 113 for 2004-05, 317 for 2021-22, 348 for 2023-24 and 376 for 2025-26.

A takes cash. On 20 May 2021 A conveys his flat to the developer for Rs 1,10,00,000 and, on 1 September 2021, buys a smaller resale flat for Rs 50,00,000. The transfer is before 23 July 2024, so the only regime is twenty per cent with indexation. The developer deducts Rs 1,10,000 under section 194-IA, one per cent of the price. In May 2021 the section reached only the consideration; the rule that deduction is on the higher of the price and the stamp value came in with the Finance Act, 2022, and on a buy-out today the developer would deduct Rs 1,18,000 in the first case and Rs 1,25,000 in the second. The table shows A’s position with the stamp value inside and outside the 110 per cent tolerance.

Member A, cash exit on 20 May 2021	Stamp value within tolerance	Stamp value beyond tolerance
Price received	Rs 1,10,00,000	Rs 1,10,00,000
Stamp duty value on the exit deed	Rs 1,18,00,000 (107.27 per cent)	Rs 1,25,00,000 (113.64 per cent)
Full value of consideration	Rs 1,10,00,000	Rs 1,25,00,000
Indexed cost (Rs 18,00,000 x 317 / 113)	Rs 50,49,558	Rs 50,49,558
Long-term capital gain	Rs 59,50,442	Rs 74,50,442
Section 54 (flat bought for Rs 50,00,000)	Rs 50,00,000	Rs 50,00,000
Taxable gain	Rs 9,50,442	Rs 24,50,442
Tax at 20 per cent	Rs 1,90,088	Rs 4,90,088

Without the reinvestment, A’s tax inside the tolerance would be Rs 11,90,088. Crossing the tolerance costs him Rs 3,00,000 in tax, because the whole stamp value replaces the price, not merely the excess over 110 per cent.

B stays. B moves out, takes possession of a larger new flat when the building use permission issues on 15 January 2024, and sells it on 20 March 2026 for Rs 1,80,00,000 (stamp value Rs 1,75,00,000). He buys another flat for Rs 1,20,00,000 within two years. The sale is after 23 July 2024, so the twelve and a half per cent computation applies, capped by the twenty per cent indexed computation if the flat was acquired before that date. Section 54 is applied inside each computation, which the text of the proviso supports, though no decision or Board statement on the point was found. The Rs 10 crore cap does not bite.

On the continuation view (Furia), nothing was transferred in 2021 and the new flat carries the old cost and the 2004-05 acquisition. On the exchange view with section 54 claimed in 2021, B transferred the old flat on 20 May 2021 for the new flat, valued at Rs 1,18,00,000; the gain of Rs 67,50,442 was exempted under section 54 against the new flat, constructed within three years; and because B sells within three years of construction, section 54(1)(ii) reduces the new flat’s cost by that gain. On the exchange view with the transfer on possession and no exemption claimed, the old flat was exchanged on 15 January 2024 for a flat then worth Rs 1,50,00,000, which becomes its cost, and B claimed nothing that year.

Member B, sale on 20 March 2026 for Rs 1,80,00,000	Continuation	Exchange in 2021, section 54 claimed then	Exchange on possession, nothing claimed then
Cost of the new flat	Rs 18,00,000	Rs 50,49,558 (Rs 1,18,00,000 less Rs 67,50,442)	Rs 1,50,00,000
Gain without indexation	Rs 1,62,00,000	Rs 1,29,50,442	Rs 30,00,000
Section 54 in that computation	Rs 1,20,00,000	Rs 1,20,00,000	Rs 30,00,000
Tax at 12.5 per cent	Rs 5,25,000	Rs 1,18,805	Rs 0
Indexed cost	Rs 59,89,381 (113 to 376)	Rs 59,89,381 (317 to 376)	Rs 1,62,06,897 (348 to 376)
Gain with indexation	Rs 1,20,10,619	Rs 1,20,10,619	Rs 17,93,103
Section 54 in that computation	Rs 1,20,00,000	Rs 1,20,00,000	Rs 17,93,103
Tax at 20 per cent	Rs 2,124	Rs 2,124	Rs 0
Tax payable on the 2026 sale (lower)	Rs 2,124	Rs 2,124	Rs 0
Tax on the earlier exchange	none	Rs 0 (gain fully exempt)	Rs 18,91,327 (gain Rs 94,56,637 at 20 per cent, indexed cost Rs 55,43,363)
Total tax	Rs 2,124	Rs 2,124	Rs 18,91,327
Tax payable on the 2026 sale without the reinvestment	Rs 20,25,000	Rs 16,18,805	Rs 3,58,621

Where the old flat was acquired before 23 July 2024 and the gain is reinvested, the indexed computation decides the tax, and on it the continuation view and the exchange view with section 54 arrive at the same figure: the clawback cuts the cost back to the old flat’s indexed cost, and indexation from 2021-22 carries that to the same number as indexation from 2004-05. Take away the reinvestment and the views part by more than Rs 4 lakh, because the unindexed computation now decides the tax and the exchange view’s reduced cost of Rs 50,49,558 is still well above the continuation view’s Rs 18,00,000.

A member who treats the redevelopment as no transfer, and loses that argument for a year in which he claimed no exemption, faces Rs 18,91,327 on the exchange gain unless he can claim section 54 in the reassessment. Two obstacles stand in the way. On this view the new flat came to him complete on the day of the transfer, so it is hard to call it constructed after the transfer (Shantaben P. Gandhi; Farida A. Dungerpurwala), and he must argue that a flat received on the date of transfer is purchased within the window. And the Revenue will say that a reassessment exists to tax escaped income, not to entertain new claims. The Gujarat High Court in CIT v. Gaurang S. Desai (Tax Appeal 1174 of 2007, 14 July 2008) left undisturbed section 54F claimed by society members only in returns filed after section 148 notices, without giving reasons on the Revenue’s objection (Part 1 sets out the order); it supports the member’s answer but is not a reasoned ruling on it. The timeline for B’s holding period, and the case where possession falls after 23 July 2024, are in Part 1, worked example 1.

Worked example 2: selling the right mid-construction, with and without section 50C

The facts are illustrative. C bought a flat in an Ahmedabad society in 2010-11 for Rs 25,00,000. The society’s registered development agreement and C’s registered member’s agreement are dated 1 June 2022. On 15 November 2025, with the building incomplete, C assigns his entitlement for Rs 95,00,000 by a tripartite deed the developer confirms; the stamp authority values it at Rs 1,20,00,000, 126.32 per cent of the price. C, a resident individual, buys a house for Rs 95,00,000 within two years and claims section 54F (the entitlement is not a residential house). The holding is long-term on any view. Cost is taken on the continuation footing, the old flat’s Rs 25,00,000; Cost Inflation Index 167 for 2010-11 and 376 for 2025-26.

Member C, assignment on 15 November 2025	Section 50C not applied (Yasin Moosa Godil line)	Section 50C applied (Arlette Rodrigues line)
Full value of consideration	Rs 95,00,000	Rs 1,20,00,000
Gain without indexation	Rs 70,00,000	Rs 95,00,000
Tax at 12.5 per cent, no reinvestment	Rs 8,75,000	Rs 11,87,500
Indexed cost (Rs 25,00,000 x 376 / 167)	not available: the right is not land or building on this view	Rs 56,28,743
Gain with indexation	not available	Rs 63,71,257
Tax at 20 per cent, no reinvestment	not available	Rs 12,74,251
Tax payable, no reinvestment	Rs 8,75,000	Rs 11,87,500
Section 54F exemption, unindexed computation	Rs 70,00,000	Rs 75,20,833
Section 54F exemption, indexed computation	not available	Rs 50,43,912
Tax at 12.5 per cent after section 54F	Rs 0	Rs 2,47,396
Tax at 20 per cent after section 54F	not available	Rs 2,65,469
Tax payable after section 54F	Rs 0	Rs 2,47,396

Where section 50C does not apply, C’s reinvestment of the whole price exempts the whole gain. Where it does, and the deemed Rs 1,20,00,000 is taken as the net consideration, the same reinvestment shelters only 95/120 of the gain and C pays Rs 2,47,396 on money he never received. That second step is contested. The member’s textual point is that section 50C deems the stamp value to be the full value “for the purposes of section 48”, while the Explanation to section 54F(1) defines net consideration on its own terms as the full value of the consideration “received or accruing as a result of the transfer”. The Revenue’s is that those are the very words section 50C deems, that section 54F exempts a gain already computed under section 48 with the deemed figure in it, and that measuring the reinvestment against a price lower than the one on which the gain is taxed would shelter more than the section allows. Tribunal orders digested in professional journals are reported to hold that the actual price, not the deemed value, is the net consideration, with one Bench reported the other way; the orders themselves have not been verified, so they are not named. The second column shows what the Revenue’s reading costs; on the member’s reading C’s tax after section 54F is nil in both columns.

The first column also cannot use the twenty per cent indexed computation. The protection in the second proviso to section 112(1)(a) is confined to “a long-term capital asset, being land or building or both”, and the first column assumes the entitlement is neither. A member who keeps out of section 50C on that footing gives up the indexation cap too, which here costs him Rs 1,00,749 if he does not reinvest. In the second column the unindexed computation is cheaper throughout, whereas in Member B’s continuation column the order flips once the exemption is applied; the comparison under the proviso has to be run after the exemption.

The buyer is exposed in the same way. If the entitlement is immovable property for section 56(2)(x), the excess of the stamp value over the price, Rs 25,00,000, is above the tolerance of Rs 9,50,000 (the higher of Rs 50,000 and ten per cent of the price), so the whole Rs 25,00,000 is the buyer’s income from other sources. If it is immovable property for section 194-IA, the buyer deducts Rs 1,20,000. If C and his buyer are both right that the entitlement is not land or building, none of these provisions applies.

Gujarat: what the record shows

No decision of the Gujarat High Court or of the Ahmedabad, Surat or Rajkot Benches on a society member who leaves a redevelopment, by cash exit, sale of the entitlement or early resale, was traced. Mumbai orders are coordinate Bench decisions; the Ahmedabad Bench should follow them on like facts or refer a disagreement to a Special Bench. Gujarat has this.

On section 50C and rights, Yasin Moosa Godil, Devindraben I. Barot and Shyama Prakash Agarwal keep booking and banakhat rights outside section 50C. On section 54 and construction, Subhash Sevaram Bhavnani counts construction begun before the sale, Parikh Amitkumar Mahendrabhai treats builder allotment as construction but insists on registration, and four Ahmedabad orders excuse builder delay; Jagdishkumar Chhotubhai Gandhi (Surat, 2026) treats an allotment letter as the agreement for the stamp value proviso. Against the assessee, Shantaben P. Gandhi and Ushaben Jayantilal Sodhan deny the exemption for a house completed before the transfer, and Asodariya Gordhanbhai Ranchhodbhai (Surat) and Hiteshbhai Mansukhbhai Bagdai (Rajkot) deny section 54F where title came years late. Aditya Harshvadan Mangaldas does not count houses under construction for the section 54F proviso. CIT v. Gaurang S. Desai (Gujarat High Court, 2008) left undisturbed section 54F allowed to members of a plot-holders’ society reassessed as transferors, on the Commissioner (Appeals)’ findings that the members “got constructed flat” and that the flats were “purchased” within two years, without distinguishing the two. Sarojben Kiritbhai Shah holds that compelled shifting under section 41A is not eviction.

Open questions in Part 3, argued both ways

1. Is a redeveloped flat “constructed” for sections 54 and 54F? For the member: Hilla J.B. Wadia treats a flat in a society’s new building on the member’s old land as construction; Circular 672 extends Circular 471 to co-operative societies; Bharati Kothari and Parikh Amitkumar apply the same to builders. For the Revenue: Rasiklal M. Parikh denies the circulars to a developer’s allotment that confers no title until a registered agreement, and distinguished Hilla Wadia because the assessee there had invested in the flat (paragraph 33), which a member who pays nothing towards construction has not. And construction can hurt the member: a flat completed before the transfer fails (Shantaben P. Gandhi; Farida A. Dungerpurwala). The member is nearer Hilla Wadia on domain, the investment limb is contested, and no order decides the point for a society member’s own flat.

2. Does the three-year window fail in a delayed project? For the member: Sardarmal Kothari (investment within the period is enough), Bharati Kothari, Paurana, Sangram Patel and Dhillkushi Gurmurti (builder delay is no bar). For the Revenue: Rasiklal; Asodariya and Hitesh Bagdai in Gujarat; Ushaben Sodhan on completion. Undecided above the Tribunal for a redevelopment; the facts (registration, related party, title) decide most cases.

3. Does section 50C apply to the sale of a member’s entitlement before completion? For the member: Yasin Moosa Godil, Devindraben Barot, Shyama Prakash Agarwal, Sushma Bajaj and Mahesh Kumar Singhania; deeming provisions are read strictly; “land or building” is narrower than “immovable property”. For the Revenue: Arlette Rodrigues and Chiranjeev Lal Khanna; the Departmental Representative’s argument in Yasin Moosa Godil that a substantially paid-for flat has been purchased; the definition of immovable property in section 269UA(d) of the 1961 Act and section 2(109) of the 2025 Act, under which, in both Acts, land and buildings include any rights in them, though its rights limb excludes rights arising from a sale, exchange or lease of the property itself. No High Court ruling; the Gujarat appeal was withdrawn.

4. Is section 54EC available on a redevelopment exit? For the member: Sherlyn Dias, Chiranjeev Lal Khanna and Gita Duggal allowed it, though all concern years before assessment year 2019-20, when section 54EC was not yet confined to land or building; and a member who conveys his flat, and accepts that it is land or building for section 50C, has no difficulty. For the Revenue: from assessment year 2019-20 section 54EC requires land or building as the original asset, and a member who escapes section 50C by calling his asset a right cannot then call it land or building. Open on the post-2019 text.

5. Can part of a cash buy-out be hardship compensation? For the member: a uniform hardship payment does not change character because the member leaves; Viren Vashi disregards labels. For the Revenue: an exiting member is bought out, not displaced; Borkar treats sums received because the flat was handed over as consideration. The drafting of the exit agreement decides how far the argument can be taken.

6. Are two flats received one house, and is a flat under redevelopment a house “owned”? For the member: Gita Duggal and Madhu Khatri before 2015-16; under section 54 only, the two-house option up to Rs 2 crore after; Sanjeev Behl for two old flats against one new; Aditya Mangaldas and Mohinder Kumar Jain on houses under construction. For the Revenue: “one residential house in India” from 2015-16; Kamla Ajmera’s adjacency test; ownership does not depend on possession; the construction limb of the section 54F proviso and section 54F(2) when the redeveloped flat is completed within three years. The member answers the proviso with the carve-out in clause (b) for the one house owned on the date of transfer, and section 54F(2), which has none, with the argument that the completed flat is that house rebuilt, not another house constructed; the Revenue replies, on the exchange view, that the completed flat is a new asset and not that house. The orders read do not deal with a member whose own flat has been demolished.

7. How is compensation paid to a holdout taxed? For the holdout: Sarojben Shah treats him as shifted, not evicted, and Vaswani Projects says, in the context of title disputes between claimants, that accepting transit rent or hardship does not decide ownership or extinguish any legal right, so his receipts should mirror the consenting members’; Viren Vashi treats consent money as hardship. For the Revenue: a premium paid only to the holdout is the price of his consent and not compensation for displacement. The point has not come up in any tax order found.

A practitioner’s checklist for the member who leaves or reinvests

1. Choose the exit and draft for it. Before signing, settle the document: a conveyance of the flat for a cash exit, an assignment confirmed by the developer for a sale of the entitlement.
2. Fix the stamp value early. For a cash exit, obtain part of the price through the bank on or before the agreement date, so that the first proviso to section 50C can fix the stamp value at that date; compare the stamp value with the price against the 110 per cent tolerance.
3. Object to an excessive stamp value. If the stamp value exceeds the price, object in writing before the Assessing Officer, with reasons going to the property, and ask for a reference under section 50C(2). Remember that a dispute of the valuation under the stamp law closes that route.
4. Treat a hardship split as a risk, not a plan. If any part of the exit sum is to be argued as hardship, have the exit agreement pay it under the same clause and at the same rate as for members who stay, and state the price of the flat separately. Disclose the amount and the agreement in the return, so that if the split fails the member has a bona fide explanation under section 270A(6)(a) and is not exposed as misreporting.
5. Check the deduction at source. Confirm deduction under section 194-IA (section 195 for a non-resident) on the figure the law required at the date of payment, and reconcile Form 26AS and the annual information statement with what was actually received.
6. Count twenty-four months before selling an entitlement. Count from the development agreement and the member’s own registered agreement; a sale after that is long-term on every view.
7. Claim the right exemption. For a seller of an entitlement, claim section 54F, with section 54 in the alternative. If he owns another house besides the flat under redevelopment, check the ownership bar in the section 54F proviso on the date of transfer.
8. Document construction and delay. Where section 54 or 54F is claimed on a redeveloped flat, register the member’s agreement and keep the development agreement, permissions, payment trail and reasons for any delay.
9. Deposit what is not yet invested. Deposit any gain or net consideration not yet invested in the Capital Gains Accounts Scheme by the due date under section 139(1).
10. Watch the lock-ins before reselling. Before selling a new flat on which an exemption was claimed, check the three-year lock-in under sections 54(1) and 54F(3) and the five-year reversal under section 80C(5); where section 54EC was claimed, do not transfer, encash or borrow against the bonds within five years (section 54EC(2)).
11. Decide on the two-house option. Where two flats are received, decide whether to spend the once-in-a-lifetime two-house option under section 54, and keep the gain within Rs 2 crore if it is used.
12. Record the deceased’s position. For an heir selling a redeveloped flat or entitlement, record the deceased’s acquisition date and cost, and the date of death relative to any transfer.

Concordance: the Income-tax Act, 1961 and the Income-tax Act, 2025

Subject	Income-tax Act, 1961	Income-tax Act, 2025
Transfer: relinquishment, extinguishment	section 2(47)(i), (ii)	section 2(109)(a), (b)
Transfer: membership or enjoyment; part performance	section 2(47)(vi), (v)	section 2(109)(f), (g)
Short-term capital asset; previous owner’s holding	section 2(42A) and Explanation 1(i)(b)	section 2(101)(a) and (c)(B)(I)
Charge to capital gains	section 45(1)	section 67(1)
Specified agreement; transfer of the share before completion	section 45(5A) and proviso	section 67(14), (15), (16)
Computation; indexed cost	section 48	section 72(1); section 72(2) and (8)
Cost to heir or donee	section 49(1)	section 73(1), Table serial 1
Cost of share under a specified agreement	section 49(7)	section 73(1), Table serial 20
Stamp duty value as consideration; 110 per cent; Valuation Officer	section 50C(1), provisos, (2), (3)	section 78(1)(a), (b), (2), (3)
Fair market value where consideration not ascertainable	section 50D	section 80
Cost of “any other right”; 1 April 2001 value	section 55(2)(a), (b)	section 90(3), (9)(a), (10)
Exemption on a residential house; deemed cost and deposit; two-house option; Rs 10 crore caps	section 54(1), (2) and provisos	section 82(1) to (8)
Exemption on other assets; deposit; ownership and construction bar; clawbacks; caps; net consideration	section 54F(1) and proviso, (2), (3), (4), Explanation	section 86(1) to (4), (5)(a), (5)(b), (6), (7), (8), (9), (10)
Exemption on investment in bonds	section 54EC	section 85(1), (2), (6)
Immovable property received for inadequate consideration	section 56(2)(x)	section 92(2)(m)
Inadequate consideration: agreement date; Valuation Officer	section 56(2)(x), first to third provisos	section 92(4)(a), (b)
Reversal of the housing deduction on transfer within five years	section 80C(5)	section 123 with Schedule XV, para 4, Table serial 3
Rate on long-term gains; pre-23 July 2024 protection	section 112(1)(a) and second proviso	section 197(1), (3)
Deduction on transfer of immovable property	section 194-IA	section 393(1), Table serial 3(i)
Deduction under a specified agreement	section 194-IC	section 393(1), Table serial 3(ii)
Deduction on payments to non-residents	section 195	section 393(2), Table serial 17
Clubbing of income from assets transferred to a spouse	section 64(1)(iv)	section 99(1)(a)(ii)
Repeal and savings; exemption conditions breached after 1 April 2026	(not applicable)	section 536, including (2)(h)

The 2025 Act references were checked against that Act’s text on the Income Tax Department’s website.

Read Part 1: transfer, cost and holding period, Part 2: hardship compensation, corpus, rent and tax deduction at source, or go on to Part 4: tenants, slum dwellers, shops, non-residents and the society.

This note is general commentary on the law as at 22 October 2026 and is not advice on any matter. The position in a particular case depends on its own facts.