Section 54F  of the Income Tax Act

1. Assessee is an Individual or HUF.

2. Capital Gain arises from the Sale of any capital asset other than Residential House.

3. This asset is called original asset.

4. Assessee has purchased a Residential House within a year before the date of transfer or constructed a residential House after the date of transfer in India. This asset is called New asset.

5. The Capital Gain shall be calculated as under:

a) If the cost of the new asset is not less than the net consideration of the original asset, the whole of the capital gain shall not be charged under section 45;

b) If the cost of the new asset is less than the net consideration in respect of the original asset, so much of the capital gain as bears to the whole of the capital gain the same proportion as the cost of the new asset bears to the net consideration, shall not be charged under section 45;

Provided that nothing contained in this section shall apply where

a) The assessee owns more than one residential house, other than the new asset on the date of transfer of the original asset; or

b) Purchases any residential house, other than the new asset, with a period of one year afet the date of transfer of the original asset; or

c) Constructs, any residential house, other than the new asset, with a period of three years after the date of transfer of the original asset and

d) 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”.

“Net Consideration”, in relation to the transfer of a Capital Asset, means the fall value of the consideration received or accruing as a result of the transfer of the Capital asset as reduced by any expenditure wholly and exclusively in connection with such transfer.

2) Where the assessee purchases, within the period of two years after the date of transfer of the original asset, or constructs within the period of three years after such date, any residential house, the Income from which is chargeable under the head. “Income from House Property”, other than the new asset, the amount of the capital gain arising from the transfer of the original asset not charged u/s 45 on the basis of the cost of the new asset as provide in clause (a) or as the case may be, clause (b), of sub section (!), shall be deemed to be chargeable “Capital Gain” relating to long term Capital asset of the previous year in which such residential House is purchased or constructed.

Where the new asset is transferred within a period of three years from the date of purchase or, as the case may be, its constructions, the amount of Capital Gain arising from the transfer of the original asset not charged u/s 45 on the basis of the cost of such new asset as provided in clause (b), (a) or, as the case may be, clause (b) of subsection1 shall be deemed to be income chargeable under the head “Capital Gains” relating to long term Capital assets of the previous year in which such new asset is transferred.

The amount of the net consideration which is not appropriated by the assessee towards the purchase of the new asset made within one year before the date on which the transfer of the original asset took place, or which is not utilized by him for the purchase or construction of the new asset before the construction of the new asset before the date of furnishing the return of income u/s 139, shall be deposited by him before furnishing such return in an account in any such Bank or institution as may be specified in. and utilized in accordance with, any scheme which the Central Govt. may, by notification in the official gazette, frame in this behalf and such return shall be accompanied by proof of such deposit, and for the purpose of sub section1, the amount, if any, already utilized by assessee for the purpose or construction of the new asset together with the amount so deposited shall be deemed to be the cost of the new asset.

Provided that if the amount deposited under this sub section is not utilized wholly of partly for the purchase or construction of the new asset within the period specified in sub-section (1), then-

(i) the amount by which-

The amount of capital gain arising from the transfer of the original asset not charged u/s 45 on the basis of the cost the new asset as provide in clause (A) or as the case may be, clause(b) of sub-section(1), exceeds

(b) the amount that would not have been so charged had the amount actually utilized by the assessee for the purpose of construction of the new asset within the period specified in  subsection (1) been the cost of the new asset, Shall be charged under section 45 as Income of the previous year in which the period of 3 years from the date of transfer of the original asset expires; and

(ii) the assessee shall be entitled to withdraw the unutilized amount in accordance with the scheme aforesaid.

Author Bio

Qualification: LL.B / Advocate
Company: S.K.Jain & Co.
Location: Faridabad, Haryana, India
Member Since: 16 May 2019 | Total Posts: 31
I am S.K.Jain , Tax Consultant cum Advocate practising in Income Tax , GST , Company Matters . The name of the concern is S.K.Jain & Co. and I am prop. of this concern . I am in practice for the last 30 years . Those who have joined the profession recently and want to discuss on the particular i View Full Profile

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  1. NANDAGOPAL says:

    Sir, I am a retired Bank official. My brother had purchased a flat in Delhi in June 1984 for Rs. 60,000/- and proposes to sell the flat for Rs. 1.75 Crores in Jan’2021. Kindly advise the Indexed cost of Acquisition and cost of sale, Capital gain amount assessable for Tax. In case he does not want to invest the Capital Gain, then what would be his taxable income and penalty if he has not invested in any CG savings scheme etc. He is a pensioner with an annual income of say Rs. 10 lacs.
    Please give your valuable advise

  2. Rohna says:

    I work for a US MNC and was offered RSUs which were vested more than 2 years back. Here’s my understanding for which I request to validate:
    1. Even if foreign shares, tax on LTCG can be saved by investing in one residential property up to Rs. 2 Cr. (I don’t have any residential property in my name)
    2. I need to invest the LTCG and not the entire consideration received from sale of shares to avail 100% exemption.
    3. I don’t necessarily need to stay in that House to make it “Residential Property”. I can put it on rent
    4. The same benefit will be available for one more residential property (max 2) after 3 years, if similar LTCG is used to purchase it.
    Kindly confirm.

  3. Roshan says:

    Sir I have sell my shop for 40 lakhs in Dec 2019 and now I m purchasing residential flat for 30 lakhs within a year still my CA is saying it’s comes under 54F and ur liable to pay tax can I have any other option kindly suggest

  4. Puneet Khanna says:

    Dear Sir,
    Very helpful article and thanks for sharing. I have a query regarding our sale of residential plot that falls under LTCG. Property was sold for 2.4 CR in March 2020. As I am an NRO TDS was 20 % roughly 60 Lacs. Which means the amount we received was 1.9 Cr which is net of tax. At that time we didn’t know about the LTCG savings schemes.

    My query is how do I reclaim back 60 lacs so as to buy a property to avoid CG tax? Due to COVID situation I couldn’t buy a property so now I have options
    – Open an account under 54 F deposit but I can only deposit the net amount i.e. 1.9 CR means the tax will be proportionate (1.9/2.4) and refund will not be in full. Or is there a way to ask for 60 lacs refund in the LTCG account on the plan to buy a property within 1.5 years
    – The other option I want to check with you is can I split 1.9CR in 2 parts of 1.4 CR and 50 lacs. With 50 Lacs buy CG tax saving bonds and claim 10 lacs on back and deposit remaining 1.4CR in the LTCG Account and ask for the remaining 50 Lacs refund to be deposited in the LTCG account under 54 F?
    Many Thanks,

  5. Nithin says:

    I sold some shares (Long term) in 2019 and used that money (30L) to buy a house. The cost of the house is 1CR
    In July 2020 i sold some additional shares which are also long term. Can i use the second lot also which i sold this year and claim exemption under 54F


  6. gopal says:

    A residential plot (A) was sold by an Individual during the year 2019. He intend to claim deduction u/s 54 F by investing the net consideration in CGAS. In the year 2020 he sold his residential house. (B). Can he claim deduction u/s 54 by again investing in CGAS. Can both the amounts of A & B lying in the CGAS be used to purchase a single residence or can be used to purchase two separate residences. If so, within what period the amount should be utilised for the purchase.

  7. R K Gupta says:

    Sir , I sold one residential plot in sept 2019 for RS 42 lacs which was allotted to me by HUDA in the year 1994. The said plot was in my individual name. In Nov 2019, I had an agreement with a builder for purchase of one flat cost of Rs 42 lacs in the joint name of myself and my wife. My wife was also service women and she is also files Incometax return separately. We resides in a house which is in joint name of my mother and my wife. In June 2020 we got the occupation of the new flat and got the registry done in joint name of me and my wife. The whole payment of Rs 42 lac to builder as cost of flat was made from my individual account. My query is that can I claim long term capital gain rebate under section 54 for full amount of Rs 42 lacs in my return or have to pay some LTGC.

  8. Lokesh says:

    Dear sir,

    There is LTCG and invested in sec 54F before due date u/s 139(1). However , return is not filed within 139(1) due date. Whether same exemption is available or not.

  9. Priyanka says:

    I have sold one property in Feb 2019 but doesnt deposit the sale amt in Capital gain account scheme and in march 2020 i have purchased one residential house property.
    Can i claim exemption under section 54F in this case? If yes then how?

  10. Devendra Saksena says:

    I sold a residential land in F,Yr.2018-19 and deposited entire amount of LTCG u/s 54f. My querries are:- (1) Can I purchase a piece of land from the preceeds of msale of original asset ?
    (2) If I do so, will I be entitled to Income Tax exemption
    (3) Can I now switch from the option of Bank Deposit to Central Govt. Bomd ?

  11. Vinod says:

    My father sold his small urban agricultural land (which was purchased in early 80s) in this FY 19-20 and deposited the proceeds under CGDAS. Now for Tax planning purpose; I want to know –
    1. What indexation will applicable for the calculation of this LTGD? Need calculation guide.
    2. He doesn’t own any residence house (though there is a house in his late father’s name; which are now being used by his brothers); can he invest under 54F in two residential units either adjacent or in the same building? Is that allowed or only unit is eligible?
    3. Can he invest partly in bonds under 54EC and partly in a residential unit under 54F and can avail exemption / deduction under both this section? Also; can he go for 54B (agricultural land) and 54F (residential unit) together as exemption / deduction?

  12. BASANT KUMAR says:

    Amount under LTCG (54F) deposited in bank in Feb 2017. Could not utilise it for purchase of house or construction. Could you kindly suggest the procedure for submission of Tax and closure of the account.

  13. Khushbu jain says:

    My father in law purchased a plot in 2004-05 for rs. 60000 and now he wants to sell out the plot for rs. 12 lakhs and give that consideration to his son for buying an under construction property. Can he ( father in law) can claim exemption under section 54 f.

  14. kartik jaiswal says:

    sir, we have a Residential land, it is regd under 3 persons, my uncle, my aunt, my father.
    We are planning to sell it and share the amount in 3 equal parts.
    so my question is can we all 3 indiviually claim deduction under section 54F? by investing the amount in new house property? My father has one own house, so does my uncle and aunt.
    Kindly advise.

  15. Anil says:

    I have (1)House A. (2) House B- no registry yet but 100% advance paid, possession taken and (3) Land. Can I sell Land and claim exemption u/s 54F for buying (4) HouseC with condition that no registry of HouseB will be done in next 2 years.
    Please advise.

  16. shridhar says:

    Query – Selling a residential plot. I DO NOT wish to reinvest in another flat/house to avoid Capital Gain Tax. What are available options to avoid Capital Gain Tax?

  17. Ashish Tiwari says:

    Hi jain Sir,

    I have a commercial shop in Borivali East(mumbai) and i am planning to sell it. It was bought in DEC 2005 and i am planning to sell it in DEC 2019. I bought it for 628000(plus other charges totaling to 1500000) and would sell it at ~2600000 . This commercial property is in the name of my mother and she would give a part(22Lakhs) of its proceeds to me for buying an under-construction flat(possession in 4 years) for which she is the co-owner( i am the first owner). There is just one other residential property in my mother’s name.

    Do i have to pay capital gains tax , how much ?

    My buyer wants to pay all of the money in white, As I have to pay the entire amount towards buying a residential property , is it ok to take it all in white or there would be implications to it ?
    Please share your contact details

  18. SRUTHY SATHIAN says:

    I have claimed 54 F during the F.Y 2018-19 by depositing the amount into capital gain account scheme .Now i want to purchase a residential house property from my sister on which i also have equal right which we have acquired through inheritance.

  19. Sanjay says:

    Mother is 72 yera old she sold her residential property & purchase new property in her spouse name she also resident in that house is she liable to pay long term capital gain all transactions are made in 2019-20

  20. Rajan says:

    For residential urban plot, LTCG will arise on its sale after 24 month like residential house or after 36 months. Residential plot comes under residential property (section 54) or it come under section 54F. After sale of residential plot do we need to invest whole sale amount on purchase only one residential house or can we invest in two residential house in next two years. Can we invest half sale amount (net consideration) in purchase of one residential house and invest other half amount in capital gain bonds or in capital gain saving/FD accounts and use it to purchase any other residential house within two years.

  21. Avinash Gautam says:

    I had 1 house(A) and 1 land.
    I sold land and purchased house(B) by claiming 54F.
    In the next year I’ve sold house (A) and purchased house (C)-Is this a revocation of Condition of 54F?
    As 54F restricts buyer to buy any other residential house other then house (B) within 2 years of transfer

  22. Avinash Gautam says:

    Dear sir,assume a person have a residential house(A) and he sold his another land and purchased house (B) and claimed 54f exemption.
    In the next year he has purchased another residential house(C) by selling house (A).
    Is there any revocation of Condition of section 54F in this case?

  23. V k bhatia says:

    My friend owns two residential flat and sold one, can he avail exemption under 54f for constructing a residence (with sale proceeds ) on 2nd plot which is already in his name.
    – if sale proceed not deposited in capital account by due date for filing it return I.e Aug 31.,19, can be used to buy residential flat or constructing residence.

  24. RN Ghosh says:

    Not able to find the regulation which says that if I sell residential land (urban area), doesnt indexation apply to land for calculating Capital Gains?

  25. HIMAT DOSHI says:

    The assessee is having one flat.
    The assessee is intend to sell other assets (gold ornaments-shown in old W.T.Record) and invest to buy new flat without selling old flat.
    Can assessee get benefit us/54– The assessee owns more than one residential house, other than the new asset on the date of transfer of the original asset;. pl give your valued opinion.

  26. SS says:

    If I build 150 sq feet with plan sanction and then sell the property within a month, I can claim under Sec 54…right?
    And thereby give the new asset out on rent, which I cant do under Sec 54F…correct?

    Thanks for the detailed article

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