Section 54F — LTCG Exemption on
Buying One New House
Sold shares, gold, land or any asset other than a house? Reinvest the net sale consideration in one residential house and shelter the long-term capital gain — conditions, the Rs10 crore cap, CGAS and 54 vs 54F vs 54EC.
Section 54F exempts the long-term capital gain on the sale of any long-term asset other than a residential house (equity shares, mutual funds, gold, land, jewellery, bonds) if you reinvest the entire net sale consideration in one residential house in India. Invest the whole consideration and the gain is fully exempt; invest part and you get a proportionate exemption. Buy within 2 years (or 1 year before) or construct within 3 years. Maximum exemption is capped at Rs10 crore.
How Section 54F Differs From Section 54
Both defer capital-gains tax by reinvesting in a house, but they cover different sold assets. Section 54 is for gains on a residential house; Section 54F is for gains on everything else that is long-term.
Section 54 — house sold
- Asset sold: a residential house
- Reinvest only the capital gain
- No cap on other houses you own
- Up to 2 houses if gain ≤ Rs2 crore (once in a lifetime)
Section 54F — other asset sold
- Asset sold: shares, gold, land, etc. (not a house)
- Reinvest the full net sale consideration
- Must not own >1 other house on the sale date
- Only 1 new house qualifies
On the date of transfer you must not own more than one residential house (apart from the new one). Own two or more and Section 54F is denied entirely — for such cases only Section 54EC bonds remain. This condition trips up investors who already hold a home and a let-out flat.
Section 54F — Conditions at a Glance
| Condition | Requirement |
|---|---|
| Asset sold | Any long-term capital asset except a residential house |
| Holding period | >12 months (listed equity / equity MFs) or >24 months (most other assets) to be long-term |
| New asset | One residential house in India (not abroad, not a plot alone) |
| Purchase window | 1 year before or 2 years after the transfer |
| Construction window | Within 3 years of the transfer |
| Ownership at transfer | Not more than 1 other residential house |
| Reinvest | Net sale consideration (not merely the gain) |
| Exemption cap | Investment counted only up to Rs10 crore |
| Lock-in | Do not sell the new house, or buy/construct another house, for 3 years |
Renumbered as clause 85 of the Income-tax Act, 2025 from AY 2026-27; the well-known "Section 54F" label and the substance are unchanged.
If you sell the new house within 3 years, or buy/construct another house within 2/3 years, the exemption you claimed is reversed and taxed as LTCG in that later year. Plan the timeline before you claim.
How Much Exemption Do You Get?
Invest the entire net sale consideration and the whole gain is exempt. Invest only part and the exemption is proportionate:
- Exempt gain = Capital gain × (Amount invested in house ÷ Net sale consideration)
- The balance gain is taxable at 12.5% LTCG (no indexation) for transfers on/after 23 July 2024, over the Rs1.25 lakh annual exemption where the asset is listed equity/equity MF.
Full investment — 100% exempt
Partial — proportionate
Estimate your own gain and tax with the income-tax calculator or the capital-gains calculator before you commit funds.
Section 54F vs 54 vs 54EC
| Parameter | 54F | 54 | 54EC |
|---|---|---|---|
| Asset sold | Any LTCA except a house | Residential house | Land or building (LTCA) |
| Reinvest in | 1 house | 1–2 houses | NHAI / REC / PFC / IRFC bonds |
| Amount to invest | Full net consideration | Only the capital gain | Only the capital gain |
| Investment limit | Up to Rs10 cr | Up to Rs10 cr | Rs50 lakh / FY |
| Time limit | Buy 2 yr / build 3 yr | Buy 2 yr / build 3 yr | 6 months |
| Other-house bar | Max 1 other house | No bar | No bar |
| Lock-in | 3 years | 3 years | 5 years |
Section 54EC bonds are capped at Rs50 lakh per financial year and are available only against gains on land/building.
Section 54F suits you if
- You sold shares, mutual funds, gold or land (not a house)
- You will reinvest the whole sale proceeds in one home
- You own at most one other house on the sale date
- You want to hold the new house long term
Look at 54EC / 54 instead if
- You already own two or more houses
- You want to invest only the gain, not the whole consideration
- You sold a house (use Section 54)
- You prefer bonds and only need to shelter up to Rs50 lakh
Capital Gains Account Scheme (CGAS)
If the house is not bought or construction not begun by the ITR due date (usually 31 July for non-audit cases) for the year of transfer, park the unutilised amount in a Capital Gains Account Scheme account at a notified bank before that date to preserve the claim.
- Open the CGAS account before the ITR due date
- Deposit the unutilised net consideration
- Use it to buy within 2 years or construct within 3 years
- Report the exemption in ITR-2 Schedule CG
If the CGAS money is not used to buy/build the house within the 2/3-year window, the unused amount is taxed as LTCG in the year the time limit expires. Track the deadline from the original transfer date, not the deposit date.
Sold shares, gold or land and want the exemption computed and filed correctly?
Talk to a Tax Expert →Section 54F — Frequently Asked Questions
Related TaxClue Services
Next in this capital-gains cluster
Sold Shares, Gold or Land? Lock In Your 54F Exemption
Our CA-led team computes your exact 54F exemption, sets up CGAS if needed, tracks the 2/3-year timeline and files ITR-2 correctly — 100% online, across India.