New Delhi, Sept. 4 -- When you sell shares, mutual funds or other capital assets, you can claim exemption from capital gains tax by reinvesting the sale amount in a residential property. This is allowed under Section 86 of the Income Tax Act 2025 (erstwhile Section 54F under Income Tax Act 1961).

In Mumbai, Rajesh Saluja did exactly this-he bought a Rs.13.90 crore house after selling some shares worth Rs.15.4 crore. He then spent another Rs.1.52 crore from the share-sale proceeds on renovation and architect fees and included these expenses while claiming capital gains tax relief.

The tax department allowed exemption on the amount that went towards buying the house, but rejected the amount spent on renovations, arguing that spending on a...