• Manasa M

Section 54F- Capital Gain on Transfer of Certain Capital Assets not be Charged in Case of Investment

Updated: Oct 14

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The Income Tax Act, of 1961 is the main statute of Income Tax in India. It provides for levy, administration, collection, and recovery of Income Tax.


The sale of any Long-Term Asset other than residential property to an individual or Hindu undivided family will be exempt in full if the entire net sales consideration is invested in-

  • Purchase of one residential house within 1 year before or 2 years after the date of transfer of such an asset or in

  • Construction of 1 Residential House within 3 years after the date of such transfer

  • If the wholesale consideration is not invested and only a part of the sale consideration is invested, the exemption will be allowed proportionately i.e.

Amount Exempt = Capital Gain X Amount Invested/ Net Sale Consideration


Exemption under section 54F will not persist in the following scenario-

The above exemption would not be available if any of the below-mentioned conditions are satisfied:-

  • The assessee does not own more than 1 Residential House Property on the date of transfer of such asset exclusive of the one he has bought for claiming exemption under section 54F. (Note: The restriction on No. of houses already owned is only applicable if the assessee is claiming exemption under Section 54F. As explained above, there is no such restriction if the assessee is claiming exemption under Section 54)

  • The assessee purchases any residential house, other than the new asset, within a period of 1 year of the transfer of the old asset.

  • The assessee constructs any residential house, other than the new asset, within a period of 3 years after the date of the old asset.

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