Section 54F - Exemption on Capital Gains from stocks, land, etc

Income Tax Income from Capital Gains
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To avail the benefits of Section 54F of the Income Tax Act, invest the capital gains from selling any asset (other than a house) into purchasing or constructing a residential property within the specified time. Ensure compliance with all conditions, such as holding only one house at the time of sale to claim full exemption.

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Hey @Dattatray_Aute ,

If you want to claim exemption u/s 54F on the purchase of a new under-construction property, the date of purchase will either be the date of allotment or date of possession.

Since you have received the possesion in Sep’24 you can claim the exemption . This is clarified in a case law of ITAT Mumbai.

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Hello Experts ,

Can I offset both LTCG and STCG again property purchase ?? @Sakshi_Jain @AkashJhaveri @Surbhi_Pal

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Hey @Raam_M ,

You can only set off long term capital gains against the purchase of a residential property.

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How can tax on ltcg on equity share can be saved by reinvesting of the profit amount without investing the profit amount in property

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Hi @Vikash689 ,

LTCG on equity shares can only be saved by reinvesting the gains in a housing property which is mentioned under section 54F of the Income Tax Act, 1961.

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Hello Team,
My query is regarding 54F section. I own a residential apartment (Original purchase year 2015) and bought another one in Aug 2024 by selling MFs in July 2024. The entire proceeds of the MFs were utilized in the new apartment. Can I offset the MF long term capital gain for purchase of the new apartment?

Thank you - Amit

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Hey @jainamit22

According to Section 54F, long-term capital gains from any asset can be exempted if you invest in one residential property within one year before or two years after realizing the gains. However, at the time of investment, you must not own more than one residential property. Since you own an apartment and have used the long-term capital gains from mutual funds to purchase a new property within the specified timeframe, you qualify for the exemption under Section 54F. You can offset the gains against the purchase of the new property.

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Thank you so much for your response. Can we also utilise the capital gains made on the MF in the last year against the purchase of this property?

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Hey @jainamit22

You can utilize long-term capital gains from the previous year if the gains are invested in the Capital Gains Account Scheme before filing the income tax return for the same year.

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This thread discusses Section 54F exemption on capital gains from stocks, land, and other assets. It provides insights into how individuals can claim exemptions, eligibility criteria, and tax-saving strategies related to capital gains taxation.

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Heres another variation:
I jointly own 2 flat (50% in each, both inherited).

Now I am planning to buy a new flat, in the same building in which I already co-own a flat, will I get the 54F exemption. To exemplify say I co-own two flat at:
Property 1 => Ist Floor, XYZ Street.
Property 2 => 1st Floor, ABC Street.
Now I intend to purchase another flat @ 2nd Floor, XYZ Street (note the building is same).

Now as per this

2 flats in the same residential building is considered as 1 unit. In such scenario will I get any exemption under 54F.

Thanks in advance.

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Thanks @Sakshi_Jain , Now Next question how i can claim it ? and What are the proofs are required for this.

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In a very recent ITAT decision , it is held that exemption under section 54 can be claim for two ADJACENT Flats only in a residential property .

In that case , deduction claimed under section 54 F will be the sum of investment made in both the Flats.

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Hi @joy,

As rightly mentioned by @anitabhadra, the exemption u/s 54 was not allowed in a case where 2 flats were in the same residential building but weren’t adjacent.

Here’s the link to the detailed case law for your reference:

Mrs. Kamla Ajmera vs Pr. Commissioner Of Income Tax on 31 January, 2024.

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@anitabhadra @Surbhi_Pal Thanks for your input. Much appreciated.

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Here is what I am looking at - I have 2 Apartments in India - both jointly in my and my wife’s name (each worth about 1 cr).
Separately, I have 2 empty land plots (non-Agriculture), in both my wife and my name, bought 10+ year ago.
I am planning to sell these 2 plots.
1st plot at sale consideration of 20L. 2nd plot at sale consideration for 50L and I am planning to buy a retirement apartment in my wife’s name at 1.5Cr.

In order to avail Section 54 (or 54 F)-

  1. Can I buy the new retirement apt in my mother-in-laws name (who does nto have any house in her name) and my wife’s name jointly to avail the tax deduction.

  2. If not, should I gift my wife’s share of 1 of the 2 apartments we already own to my name and buy the new retirement apt in my wife’s name and avail the tax deduction?

Any other options to get Capital gains tax benefit?

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Hello @Anand_Suganya

  1. To avail the capital gains tax exemption under Section 54F, the new property must be purchased in your name or jointly with your wife. You will not be eligible for the exemption if the new property is purchased in your mother-in-law’s name.

  2. If you transfer a share of one of the co-owned properties from your wife to your name, she will be able to claim the exemption under Section 54F, as she will then hold only one residential property at the time of sale.

Alternatively, you can invest in capital gains bonds under Section 54EC to claim the capital gains exemption.

Hope this helps!