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, IN
Member Since: 16 May 2019 | Total Posts: 9
I am s.k.jain , tax consultant , 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 . . View Full Profile

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59 Comments

  1. 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

    1. skjain1147 says:

      The difference is Rs. 10 Lakhs . If you do not make investment full of the net sales consideration then Your CA is correctly saying that you will have to pay tax . Rs. 30 Lakh is 75% of the 40 lakhs . Calculate the long term capital gain . In this scene 75% of the capital gain shall not be charged to tax . 25% shall be chargeable to tax .Section 54F (b) of the Act .It depends on how much the long term capital gain comes . You have to keep this net consideration of 40 Lakhs with the capital gain deposit scheme with any scheduled bank on or before 30.11.2020 . You still have the time to invest in residential property with in two years from the date of transfer . The house purchased by you costs 30 Lakhs . Now the balance can be used for the purpose of renovation of the new house . In that way the cost of the house purchased and renovation expenses which are incurred can save you from LTCG .This is just my opinion . Consult you local CA sure before any decision you take . Thanks with regards .

  2. 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,
    Puneet

    1. sushil kumar says:

      To strengthen puneet khanna’s points,Isubmit, i) willTds (Rs60L)deducted by buyer & deposited with I Tax deptt act as expediture on sale proceed or contribution towards LTCG deposit. ii) Sec 54F,provides for deposit of full sale proceed in LTCG Account scheme1988 to get full tax rebate.What the seller got is minus TDS(60L) Should he pay or compensate for TDS from his pocket? iii) What should be cost of new asset and its way of acquiring it to be without any tax liability.
      Thanks!!

  3. Nithin says:

    Hi,
    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

    Thanks,
    Nithin

    1. skjain1147 says:

      yes ,you can claim deduction u/s 54F as you have bought a property which is residential for Rs.1 Cr and the long term capital gain is very less in comparison to the investment in residential property . but you must remember that the gap between purchase of residential property and sale of second slot of shares should not be greater that one year .

  4. 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.

    1. skjain1147 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.
      Yes: you can claim deduction u/s 54F by keeping the net consideration with CGAS before the due date of filing of the return
      In the year 2020 he sold his residential house. (B). Can he claim deduction u/s 54 by again investing in CGAS.
      Yes , you can claim deduction u/s 54 by investing in CGAS . This transaction as well as the year is different from the previous one .
      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.
      Yes , within the stipulated period you can purchase a single residential house out of the funds in both the cases kept with CGAS .If you have to purchase two residential houses then for claiming deduction u/s 54 F you have to purchase this residential house after a gap of one year from the date of transfer of the orginal asset
      If so, within what period the amount should be utilised for the purchase.
      For claiming deduction under section 54F and 54 you have to make investment with a period of one year before the date of transfer or within two years after the date of transfer of the original asset for purchasing residential property . or construction has to be made within a period of three years after the date of transfer of the original asset .As you case has both 54 and 54F you must have to follow Ist proviso to section 54 F of the Act.

  5. 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 with.total 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.

    1. skjain1147 says:

      Sir ,
      Your question is as under :
      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 with total 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 Income tax return separately.
      We reside 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.

      My answer to the question is as under :
      The steps are as under:
      Plot was allotted in the year 1994 .The plot was residential unit but not a residential unit . The deduction can be claimed u/s 54 F not 54 . Section 54 comes to the picture when a residential house is sold . Ok
      Now
      You have sold the plot in Sep. 2019 . Here arises LTCG and you can calculate it according to new index .
      You wife was in service or not . she was in ownership of a residential property with your mother . Not relevant here .
      Now in June 2020 you got the occupation of a new flat and got registry done in the joint name of you and your wife . The whole payment of Rs. 42 lakhs was made by you to the builder . The name of your wife is irrelevant for claiming deduction u/s 54F as the entire investment for purchase of residential unit was made by you .The name of your wife in the registry shall not debar you for claiming deduction u/s 54 F of the Act . You have not to ignore other conditions u/s 54F of the Act .
      Yes , you can claim deduction u/s 54 F of the Act not u/s 54 as written by you in your quarry .
      You can reach me at skjain1147@gmail.com

  6. 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.

  7. Priyanka says:

    Sir,
    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?

    1. skjain1147 says:

      Madam Priyanka ji , Plz tell if the assessee has filed his ITR for the AYr. 2019-20 . If you have filed the return and not shown capital gain then revise the return as it can be revised till 31.7.2020 and claim the deduction u/s 54F of the act as the property has been purchased by now . If you have not filed the return then file the same claiming exemption u/s 54 F of the act . Litigation may come because it was essential to deposit the sales consideration with the bank under capital gain deposit scheme on or before due date of filing of the return . But chances are litigation may not come .

  8. 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 ?

    1. skjain1147 says:

      sir , yes you can purchase a piece of land out of the sale proceeds of the original asset and within a period of three years assessee has to construct one residential house in India . If you purchase only a piece of land but do not construct residential house then you are not entitled for deduction u/s 54F . You can make investment in Govt. Bonds out of the sale proceeds of the original asset within 6 months from the date of the transfer of the original asset . If you have already deposited the sales consideration with the bank under the deposit scheme then you can withdraw the money from the bank and make investment in purchasing Govt. Bonds .

  9. 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?

    1. skjain1147 says:

      As the land is Agriculture land which is urban . If Agriculture Land is urban then the sale proceeds are taxable as it is capital asset as per section 2(14) of the IT Act , 1961 . Assessee has to keep the capital gain CGDAS before due date of filing of the return or assessee has to make investment in purchase of Agriculture land before filing the return.
      Now answer to Q.No. 1 is
      New indexation will be applicable taking 2001 as the base year . Circle rate as on 1.4.2001 shall be the taken as the cost price for calculating capital gain .
      calculation shall be made on providing facts and figures .
      Ans. to Q No. 2 is NA as the assessee has to invest in purchase of Agriculture Land not in residential house .
      3. The ans. is NA
      4. The ans. is NA
      5. yes , the assessee can ivest in bonds with in 6 months from the date of sale of agriculture land and can avail deduction u/sd 54EC of the Act .
      6. NA . The assessee can avail deduction u/s 54B only subject to fullfillment of the conditions u/s 54B of the Act .

  10. 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.

    1. skjain1147 says:

      sir , you have deposited the amount in Feb .2017 it means you have sold the property during the F.Yr. 2016-17 but you have not purchased the property during the prescribed period . Now you see when three years are going to expire . The year in which three year expires then you have to pay LTCG u/s 45 of the Act as income of the previous year in which three years expires . As you have neither purchased any residential property nor constructed any residential property . The you have to pay the tax . For this you can approach the bank . Then they will close the account and will ask you to submit the challan for the payment of the tax of the previous year in which three year expires . This is as per section 54F subsection 4 part b of proviso .. Consult your CA before doing all this .

  11. 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.

    1. skjain1147 says:

      YES , YOUR FATHER IN LAW CAN PURCHASE THE PROPERTY USING THE ENTIRE SALES CONSIDERATION OF THE PLOT IN THE NAME OF HIS SON . THERE ARE JUDGEMENTS ON THIS ISSUE . There is no denial . Provided your father in law uses the sales consideration before the due date of filing the return or keeping the consideration in CGAS with the banks . The sales consideration has to be utilized in purchasing the residential property within two years from the date of transfer

  12. 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.

    1. skjain says:

      Residential Land is not residential house. No claim of deduction u/s 54 of the Act.
      Now come to section 54F of the Act.
      Sharing of sale proceeds in three equal persons is ok.
      Now it concludes that a single property has been sold by 3 persons separately.
      one person sold his share of land and other two sold their share of land separately though to a same person.
      Yes all the three persons are entitled to claim deduction u/s 54F of the act separately by making investment in the residential property respectively within the stipulated time following the other conditions in the section 54F of the Act 1961.
      “Provision to section 54F says”
      Provided that nothing contained in this sub-section shall apply where the assessee
      “owns more than one residential house other than the new asset ( New asset to be purchased for claiming deduction u/s 54F of the act) on the date of transfer of the new asset.
      Go ahead following the conditions enshrined in section 54F of the Act .

  13. 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.

  14. 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?

    1. skjain1147 says:

      sir , U/s 54EC of the Income tax act , you can make investment with long term specified assets upto Rs. 50 Lakh with in six months from the date of transfer of the original asset . The lock in period is three years . Bonds which are notified by the Central govt. like National Highway authority of India and Rural Electrification Corporation Limited .

      1. 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.

  15. 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

  16. 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.

      1. SRUTHY SATHIAN says:

        Sir,
        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.
        Can i utilise the amount deposited in capital gain account scheme for the above said purchase?

        1. Sandeep Jain says:

          sir , your sister has acquired property through inheritance that is her concern . Your are going to buy the property from her by paying full consideration as per circle rate .you are buying her share in the property on which you have no control . For availing deduction u/s 54F you can utilize the funds kept in the capital gain account scheme following the other provisions enshrined in the relevant section .

  17. 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

    1. skjain1147 says:

      Dear sir , no doubt assessee can make investment in the name of her spouse by purchasing new residential property as the plane language of section 54 of the act simply asks for investment but it does not say investment only in the name of the assessee . But there arises litigation . To avoid litigation it is better if mother purchases property in her name only .

  18. 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.

    1. skjain1147 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.
      Section 54 covers residential house only . If it is a residential plot then it will be covered u/s 54F only . If you are making sale of residential plot rural or urban , LTCG will arise if it is sold after 24 months . Before 24 months STCG will arise .
      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.
      After sale of residential plot you have to invest the net sale consideration as residential plot is covered u/s 54F .The investment can be made in two residential units provided they are adjacent units .
      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.
      The other half can be kept in capital gain deposit scheme with banks and further investment can be made for purchase of capital bonds with in the stipulated period prescribed in the ACT.

  19. 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

    1. skjain1147 says:

      Section 54F restricts a person to purchase any residential house , other than the new asset , with in period of one year after the date of transfer of the original asset ; ( the time provided is one year not two years ) . In my opinion this will be violation of section 54F . To avoid litigation and all it is good not to buy residential house within one year from the date of transfer of the original asset i.e. land . Affairs can be manged . First you have sold the land . then house A . Now section 54 will come to the scene . House C can be purchased within two years from the date when you have sold the house A . In this way you can save capital gain in both the conditions .Thanks with regards

  20. 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?

    1. skjain1147 says:

      Section 54F restricts a person to purchase any residential house , other than the new asset , with in period of one year after the date of transfer of the original asset ; ( the time provided is one year not two years ) . In my opinion this will be violation of section 54F . To avoid litigation and all it is good not to buy residential house within one year from the date of transfer of the original asset i.e. land . Affairs can be manged . First you have sold the land . then house A . Now section 54 will come to the scene . House C can be purchased within two years from the date when you have sold the house A . In this way you can save capital gain in both the conditions .Thanks with regards

  21. 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.

    1. skjain1147 says:

      Question
      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.
      Ans.
      By selling a residential property (Flat) you can avail deduction u/s 54 of the Act , not 54F provided you make investment of the capital gain amount in purchase or construction of residential property in India .
      If it is 2nd Flat or 2nd plot . If it is flat it means it is already constructed .
      The sale proceeds has to be invested in purchase or construction of the residential house . If not invested earlier to due date of filing of the return then he or she will have to make the payment of capital gain tax at the time of filing of the return .( read section 54(2) of the act )

    2. skjain1147 says:

      Correct answer is this
      Question
      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.
      Ans.
      By selling a residential property (Flat) you can avail deduction u/s 54 of the Act , not 54F provided you make investment of the capital gain amount in purchase or construction of residential property in India .
      If it is 2nd Flat or 2nd plot . If it is flat it means it is already constructed .
      The sale proceeds( only capital gain portion) has to be invested in purchase or construction of the residential house . If not invested earlier to due date of filing of the return then keep the money in capital gain deposit scheme in some Bank ) or if not deposited with bank then he or she will have to make the payment of capital gain tax at the time of filing of the return .( read section 54(2) of the act )

  22. 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?

    1. skjain1147 says:

      Indexation applies to every capital asset whether it is land or house or any other capital asset . for capital asset which is covered in section 2(14) of the Income tax Act , 1961

    1. skjain1147 says:

      yes , you can save the tax under this section if you construct residential house within 3 years from the date of transfer of the original asset . you have to invest the entire sales consideration of the residential plot on the construction of the new asset i.e. residential house .

  23. 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.

    1. skjain1147 says:

      1. When an asset other than a residential house is sold and re-invested in Residential property. The deduction allowed is u/s 54F not 54.
      2. Gold ornaments shown in old W.T Returns.
      Gold Ornaments is a capital asset by virtue of section 2(14) of the Income Tax Act, 1961. gold ornaments is a capital asset. Certainly capital gain will arise when gold is sold. Deduction u/s 54 F is available provided re-investment is made in purchasing a Residential House provided the net consideration is invested in purchase of the new Asset.
      The 54 F deduction is not available
      If the assessee
      a) Own more than one Residential house, other than the new assest, on the date of transfer of the original asset, or
      b) purchases any residential house, other the new asset, within a period of one year after the date of transfer of the original asset: or
      c) Constructs any residential house, other than the new asset, within a period of 3 years after the date of transfer of the original asset.
      In your case as the assessee owns more than own residential house, other than the new asset on the date of transfer of the original asset, he is not entitled the deduction u/s 54 F.

  24. 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

    1. skjain1147 says:

      yes , any asset other than residential house , if sale is made then 54F will help in saving capital gain tax .Foreign stock is certainly a capital asset .

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