Definition
Section 54F
Section 54F allows exemption of long-term capital gains from selling any asset other than a residential house — such as land, shares or gold — if you invest the net sale proceeds in a residential house.
Unlike Section 54 (which applies to gains from selling a house), Section 54F covers gains from other long-term assets, but it requires reinvesting the entire net sale consideration, not just the gain, to get full exemption; investing part gives a proportionate benefit. Conditions include not owning more than one other residential house on the date of transfer and holding the new house for the required period.
The purchase or construction must happen within the prescribed windows, and unused amounts can be parked in the Capital Gains Account Scheme meanwhile. Section 54F is useful for those selling, say, a plot of land or shares and wanting to channel the proceeds into a home tax-efficiently.
Related terms
- Real Estate Capital GainsReal estate capital gains are the profits you make when you sell a property for more than its cost, and they are taxable in India as short-term or long-term gains.
- Section 54Section 54 of the Income Tax Act lets an individual save tax on long-term capital gains from selling a residential house by reinvesting the gain in another residential house.
- Section 54EC BondsSection 54EC bonds are specified capital-gains bonds (issued by entities like NHAI, REC, PFC and IRFC) in which you can invest long-term gains from selling property to claim a tax exemption.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.