While exemptions are available for long-term capital gains, short-term capital gains attract tax. The assessee can claim full exemption for long-term capital gains if such amount is invested in house property within a timeframe. This exemption is available when he or she sells a house and the capital gains amount is reinvested in another house. For example, you were staying in your own house. Then, you booked a property with a builder which was under construction. You started remitting the purchase price in instalments from April 15, 2008. When the new house was ready to occupy, you sold your old house and moved in to the new one by March 10, 2009. In this case, the entire capital gains on account of selling the old house was invested in the new house, within the specified period and, therefore, you are entitled for exemption. If the amount is not invested in a new house before the due date of filing of returns, the amount should be invested in the capital gains account scheme of a nationalised bank.

Suppose you have sold your house and utilised a part of capital gains to purchase a plot of land. You may need one to two years time to construct a house on the plot. In such case, you need to deposit the balance capital gains and utilise it for construction.