Article explains Circumstances to be fulfilled for availing exemption under section 54F, What ‘Net Consideration’ means for Section 54F, Non-availability of exemption under section 54F, Amount of exemption available under section 54F, Circumstances under which Section 54F exemption would be withdrawn and Synopsis of the entire provisions of section 54F of the Income Tax Act.
Provisions of section 54F of the Income Tax Act provides exemption towards long term capital gain (other than a residential house) when the amount is invested in purchasing or constructing a new residential house property. The entire provisions of section 54F are explained in the present article.
Page Contents
- Circumstances to be fulfilled for availing exemption under section 54F –
- Understanding the term ‘Net Consideration’ –
- Non-availability of exemption under section 54F –
- Amount of exemption available under section 54F –
- Circumstances under which Section 54F exemption would be withdrawn –
- Synopsis of the entire provisions of section 54F of the Income Tax Act
Circumstances to be fulfilled for availing exemption under section 54F –
The assessee needs to satisfy the following conditions in order to avail exemption under section 54F of the Income Tax Act –
1. An exemption under section 54F is available only to an individual or a Hindu Undivided Family (HUF).
2. An exemption is available towards the capital gain arisen on the transfer of any long term capital asset other than a residential house.
3. The ‘net consideration’ arisen on the transfer of long term capital asset is invested in either of the following manners –
a. The amount is invested to purchase one residential house in India. It is compulsory that such investment is made within a period of 1 year before or 2 years after the date of transfer; or
b. The amount is invested, within a period of three years, to construct one residential house in India.
Understanding the term ‘Net Consideration’ –
The assessee is required to re-invest the ‘net consideration’, in order to avail exemption under section 54F of the Income Tax Act. The term ‘net consideration’ is defined under the Explanation to section 54F. Accordingly, net consideration means the full value of the consideration received on account of the transfer of long term capital assets reduced by any expenditure exclusively incurred in connection with the transfer.
Net consideration = Full value of consideration (-) Expenditure
Non-availability of exemption under section 54F –
The exemption under section 54F is not available under the following circumstances –
1. The assessee already owns more than one residential house on the date of transfer of the long term capital assets.
2. The assessee purchases additional residential house (other than the new residential house purchased/ constructed to claim an exemption under section 54F is claimed) within a period of one year from the date of transfer of the long term capital asset.
3. The assessee constructs additional residential house (other than the new residential house purchased/ constructed to claim an exemption under section 54F is claimed) within a period of three years from the date of transfer of the long term capital asset.
In the aforesaid three cases, the amount of capital gains arising from the transfer of the original asset, which was not charged to tax, will be deemed to be the income by way of long term capital gains of the year in which new house is transferred or another residential house (other than the new house) whose income is taxable under the head ” Income From House Property” is purchased or constructed, as the case may be.
It is important that, in the cases above, the income from the residential house (other than the one owned on the date of transfer of the long term capital asset) is chargeable under the head ‘Income from house property’.
Amount of exemption available under section 54F –
Section 54F of the Income Tax Act provides exemption as under –
| Particulars | Amount of exemption |
| When full net consideration is invested | The full amount of long term capital gain is exempt |
| When proportionate net consideration is invested | Exemption =
Long term capital gain * Amount re-invested / Net consideration |
Circumstances under which Section 54F exemption would be withdrawn –
The assessee cannot transfer the newly purchased or constructed residential house for a period of three years from the date of purchase or date of construction, as the case may be.
However, in case the assessee transfers the newly purchased/ constructed residential house, then, the capital gain exempted under section 54F would be taxable as long term capital gain in the previous year in which the residential house is transferred.
Capital Gain Deposit Account Scheme –
The provisions of section 54F allow the assessee to re-invest in any of the following manner –
1. In case of purchasing of the residential house – the assessee can invest one year before or two years after.
2. In the case of constructing a new residential house – the assessee can construct within a period of three years.
However, if the amount is not re-invested within the last date of filing of return of income. Then, the assessee is required to deposit the unutilized amount into the capital gain deposit account scheme. The unutilized amount deposited into the account can be used for purchasing or constructing the residential house within the period of two years or three years.
If the assessee fails to utilize the amount within the specified period of two or three years, then, the unutilized amount would be treated as capital gain on proportionate basis based on exemption claimed earlier as per clause (a) and clause (b) of Section 54F(1) in the previous year in which the period expires.
Synopsis of the entire provisions of section 54F of the Income Tax Act
The gist of the above provisions are summarized hereunder –
| Nature of assessee eligible for exemption | Individual or HUF |
| Nature of capital asset transferred | Long term capital asset other than the residential house |
| Nature of re-investment | Purchased one residential house within one year before or two years after the date of transfer; or
Constructed one residential house within three years from the date of transfer. |
| Withdrawal of exemption | If the purchased or constructed residential house is transferred before three years. |
| Capital Gain Deposit Account Scheme | If the amount is not re-invested by the last day of filing of the return, then, the balance amount should be deposited in the capital gain deposit account scheme. |
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Why am I getting following error in 54F and how do I resolve it?
Error :Deduction u/s. 54F claimed here (Table D) should match with total of deduction(s) claimed in respective asset.
I have sold my residential property on 30.06.2021 of Rs.2.62 crore and bought a new residential property on 01.06.2022 of Rs.3.18 crore and claimed deduction of Rs.1.76 crore. Please confirm can I claim deduction U/s 54F of balance amount of Rs.3.18 crore Less 1.76 crore i.e. 1.42 in next FY 2022-23 on sale of equity shares of Rs.50 lakh sold on 31.012.2022.
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Can I rent a flat purchased under 54F immediately , if not , then after what time so that concession given under section 54F is not withdrawn?
I have sold my land and from the proceeds thereof I intend to purchase two residential house. whether I will have option to claim capital gains in respect of either of the house. I have already one house
I have a residential Flat in Mumbai. I bought a second Residential Flat in Goa for Rs. 68 lakh, , Agreement Dated 04-01-2022. I started making payments from 04-12-2021 by selling Rs. 8 lakh worth of shares, Rs. 15lakh worth of Mutual Funds and the remaining Rs. 45 lakh from my Savings Account. I claimed Capital Gains exemption on the Rs 8 lakh Shares and the Rs. 15 lakh MF in my ITR filed for AY 2022-2023. Can I now sell shares worth Rs. 45 lakh and claim Capital Gains exemption for my ITR to be filed for AY 2023-2024? Also upto when can I sell my shares worth Rs. 45 lakh to claim Capital Gains exemption?
Read more at: https://taxguru.in/income-tax/section-54f-capital-gain-tax-exemption.html#comment-122337105
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Whether Exemption U/s.54F is allowed on Capital Gain arised U/s. 45(2) of the Act.
I have a residential Flat in Mumbai. I bought a second Residential Flat in Goa for Rs. 68 lakh, , Agreement Dated 04-01-2022. I started making payments from 04-12-2021 by selling Rs. 8 lakh worth of shares, Rs. 15lakh worth of Mutual Funds and the remaining Rs. 45 lakh from my Savings Account. I claimed Capital Gains exemption on the Rs 8 lakh Shares and the Rs. 15 lakh MF in my ITR filed for AY 2022-2023. Can I now sell shares worth Rs. 45 lakh and claim Capital Gains exemption for my ITR to be filed for AY 2023-2024?
Also upto when can I sell my shares worth Rs. 45 lakh to claim Capital Gains exemption?
How to save tax on sale of a commercial property belonging to a partnership firm under section
54 F?
Hello,
I have a question regarding capital gain tax incurred by selling of mutual funds and usage of section 54F to counter that tax, by investing the ‘net consideration’ housing property.
54F – https://taxguru.in/income-tax/section-54f-capital-gain-tax-exemption.html
The 54F sections says, that I can invest the ‘net consideration’ I received by selling a mutual fund and reinvest in housing property. The questions is, will 54F be applicable on repayment of loan as well for that property?
Example –
Suppose, 1 sell Mutual fund worth 10 lacs in an year. I use 5 lac of it to pay to builder for my new house and rest 5 lacs, I use later to repay my housing loan on same property.
Can I claim 10 lacs capital tax benefit in this case or just 5 lacs ( prorated)?
Sold Mutual funds standing jointly in my name with my wife for more than 3 years ,and reinvested the entire proceeds in part financing purchase of a flat in the name 0f My wife and my daughter in law . Will I be eligible for exemption under 54 F ?
I have got 2 flat from my father inheritance. I have no purchased any flat. but now I sold land and form i got LTCG . if I flat purchase then i get 54F propertion exemption or not ?. please reply
My father sold residential plot for Rs.45 lakhs in September 2021. Unfortunately he died in February 2022. As legal heirs, I got transferred into my a/c this amt. Can I avail tax exemption for the long term gain for this by investing in house property or in bonds ? At the time of selling this property another two residential plots exists on his name. I have married sister also.. Please guide.
Regards,
I wish to sell my plot of land for 60 lakhs . the capital gain is 15 lakhs. I propose to buy REC bonds of 8 lakhs and pay LTCG on 7 lakhs, is it ok to get me exemption on 8 lakhs invested in REC bonds?
I plan to sell my plot of land for Rs one crore. In order to claim maximum tax exemption I wish to spend the net sale consideration as given below:
1.Buy capital gains bonds of REC/NHAI worth Rs fifty lacs.
2.Remaining Rs fifty lacs to buy a plot and construct residential house.
If I spend Rs one crore as stated above, will I get full tax exemption or face some unforeseen problems/quaries. Please do let me know.
Regards
J K Bhatt
I sold two residential plots one in Nov 2021 and other in Feb 2022. Please advise:
Can proceeds from the plots both be invested for buying one single house/flat.
If the same is not done before FY (31 Mar 2022), do the proceeds need to be parked in a Capital Gain account? Kindly advise.
Regards.
I got a land from my Father through a will in 2008,now it is worth Rs50 lakhs.If I sell it whether I have to pay LCGT @20%
Me and my husband owns a lamd in mangalore. I am planning to sell my long term stocks and invest in constructing of house on that land. Will i be eligible to claim 54f tax exemption as me and my husband both owns the property
Sir, I have Sold my Flat in Apr-21 & booked New Flat in May-21,in Down payment..Now Builder Says He has got RERA in Sep-21 ,He want to Transfer Fund which i have already paid to My Account Again & wants fresh cheques in RERa Account.Can i do this ?
At these day no flat is got in possession upto 3 to 4 yrs.Then how anyone svail the provision under section 54 F of Income Tax.Sir,please guide me.
Sir what if someone invest in under construction property before selling their old house in this scenario can 54 F can be availed?
What if the seller owns 1 residential house and has acquired ancestral property which is mutated in his and his 3 brother’s name. Can the money gained by sale of his 2nd property be reinvested in buying a new property to obtain tax exemption and upto what limit.
What if the seller owns 1 residential house and has acquired ancestral property which is mutated in his and his 3 brother’s name. Can the money gained by sale of property be reinvested in buying a new property?
Is the exemption also available on sale of Long Term held “Internationally/Foreign shares”?
For a resident tax payer who pays all taxes in India.
I sold my house and registration was done on 19.04.2021. I received advance in February 2021. So I understand that the LTCG is to be claimed in the ITR to be filed for 2021-2022 and the investment in house property is to be made within two years from 19.04.2021. Also I understand that if I make payment for purchase of a flat in prescribed instalments during this FY then I need not have to deposit in LTCG account with any bank. However, the TDS was deducted by the purchaser in Feb 2020 itself on the full amount of sale consideration. In which year I should claim the refund of the said TDS? Please advise me.
I sold a residential plot in July 2019 and I have to invest the sale proceeds in a residential unit by June 2021 or construct a house by by June 2022 to avail tax benefits under Section 54F of Income Tax. However, due to Covid-19 constraints since March 2020, i have not been able to utilize the Capital Gain. Has the Govt. extended the time limit for such investments, owing to the Pandemic ?
Any extension of time limit under section 54 due to covid 19 situation..
Sir, I was required to purchase new house from my LTCG in two years time. Due to Covid restrictions the period has lapsed. Is there any relaxation in time limit?
Can Exemption u/s.54F can be claimed against the Capital gains arises against the surrender of ‘Tenancy Rights’
Can Exemption u/s.54F can be claimed against the Capital gains arises against the surrender of ‘Tenancy Rights’ – Tenant has got a flat in new constructed building (free of cost – without consideration) against surrender of his tenancy rights
Sir, I purchased a residential land on dt. 4th August 2018 and now I want to sell this plot in June/July 2021. Is it’s profit will be Long Term Capital gains or Sort term capital gains. Is there time limit for LTCG between purchased date & Selling date?
I purchased my first apartment in March 2020 by availing a home loan. We have been trying to close the loan with proceeds of selling a plot. Due to COVID lockdowns and market situations we were not able to sell the plot by March 2021. We are most likely to sell it in another month.
As per sec 54F if I need to avail the exemption I should have sold the plot and used the proceeds within 1 year of apartment purchase.
Can i still avail this exemption if I am late by 3-4 months due to COVID scenario?
I have earned LTCG for share investing during this year ended 31.03.21. While filling he ITR 2 using the last year form I didn’t found to deduct Rs.1 lac exemption under LTCG. How I can show it. ( I was trying to see the tax liability including STCG
Sir, I could not see the explained note regarding the exemption of Rs.1 lac earned under LTCG as mentioned in the reply column. I request you to kindly arrange to send me a copy of the same at least in my email id.”sivan3204@gmail.com”.
It was really explained very well
Sir. Iam a retired Divisional engineer from BSNL. I received half of a house (ground floor) from my mother in end of 2010.
Already I have my own house.
During middle of 2020 I constructed a new house for which land was purchased during March 2020.i retired 29.02.2020
I invested my retirement benefits in construction of the new house.
As I and my husband are getting aged we feel hard maintaining the half house which is in other station I sold the property. I don’t want my daughters to get share from half house and maintanance by sharing will be a problem.
My question is whether can I claim in 54F or any other provision that my new built house expense can be met with the gain I got thro my long term capital of my half house.
Pl guide me.
Thank you.
I hv an unconstructed residential land which I purchased in 2010 & this year in april’2021, I want to sell half part of this land to my friend & want to construct my first new house on the remaining part of this unconstructed land .
In this particular case will I be eligible to get exemption from LTCG under section 54F?
Please elaborate.
Yes you can avail it
Sir can i use our ltcg un listed share in society flat in joint name 50: 50 ltcg 40 lakh total and the flat price 1cr. In section 54f.
As per section 54F, if person A and person B have jointly re-invested their capital gains into one single new property, then during the registration of this property, is it mandatory to register these properties in the names of person A and person B? if not can it be registered under someone else like person C (The situation here is that person C is the son)? if not, can person C be a joint owner. To be a joint owner, should someone atleast make a minimum payment during the purchase of the property or not needed?
I have brought a residential house last financial year.
Will I get an capital gain exemption (above 1 Lakh) from the sale of equity ( holding more than one year LTCG) this financial year ? or whether both transaction need to be within one financial year itself?
i have purchasrd land within 6 months but will construct within 2 years but kept money in normal saving account can i avail benifit of long term benifit of tax
If I sold a residential house for Rs. 1.5 Cr and want to distribute in my 3 Sons by purchasing plots or flats and i also want to separate one share for me..
What is the meaning of Net consideration in the formula below?
Exemption =
Long term capital gain * Amount re-invested / Net consideration
Sir, suppose if i sell a plot in march 2020 for Rs. 30,000,00/- and purchase a another residential plot in june 2020 for Rs. 35,00,000 and then constructed it.
so can i get exemption u/s 54F for Rs. 30,00,000/- ??
Sir, I wanted to know that I have sold a old Flat in Sept 2019 for Rs 26lacs which was purchased(2004). Re-invested Rs 28 lacs in new flat before IT filing for AY 20-21. I already hold another flat acquired in 2016 with 50% share with my brother and availing relief us 24b for last three years. Can I claim both 54F as LTCG is Zero & claim 24b against another flat for AY 20-21? Please advice which ITR is applicable
Pls correct me if I’m wrong. I think here, it is interpreted wrongly about the income from the house property. You have said that
“It is important that, in the cases above, the income from the residential house (other than the one owned on the date of transfer of the long term capital asset) is chargeable under the head ‘Income from house property’.”
Whereas the act says
“Provided that nothing contained in this sub-section shall apply where—
(b) the income from such residential house, other than the one residential house owned on the date of transfer of the original asset, is chargeable under the head “Income from house property”.
I think it means that as you get income from the new house acquired, the section (exemption) will not apply. Please clarify
Can I build house using my capital gains in my village where land is categories as agriculture land?
Hi Sandeep Ji,
Under S.54F(4), unutilized CGDS amount directly won’t be taxable as CG. It is proportionate amount. Refer proviso to S.54(4).
Thanks.
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