Through the study of Controllable Shunt Reactor of Transformer Type (CSRT), the effect of CSRT used on transmission line for line differential protection is analyzed and different solutions are proposed and compared. A new method of time domain compensation for CSRT used on transmission line is presented. The transient capacitive current compensation requirements and high sensitivity of line differential protection are satisfied by this method. High reliability of line differential protection is ensured by the configuration with and without compensation in parallel while CT installed on CSRT is abnormal. The feasibility for the method above is verified by an engineering application.