To get tax exemption on income from sale of house property, do I necessarily have to buy property?
No. You need not buy a second property. You can invest the proceeds from sale of house property in capital gain bonds issued by the National Highways Authority of India and the Rural Electrification Corporation within six months. Benefits come to you under Section 54EC.
How much can I invest in these bonds? The law exempts investments of up to Rs 50 lakh in one financial year, made within six months of the date of sale of property. But, many invest over two financial years. As a result, they get tax benefits for up to Rs 1 crore.