Who Can Claim Exemption u/s 54F?

This exemption is available to the following persons:

• Individuals
• Hindu Undivided Families (HUFs)

How Can You Claim the Tax Exemption u/s 54F?

To qualify for this exemption, you need to follow some important conditions, such as:

• You must purchase the new residential property in India within 1 year before or 2 years after the sale of the asset.
• In case you are constructing a new residential property, then it must be constructed within 3 years of the sale of the old asset.

How to Calculate Exemption u/s 54F?

The exemption amount is calculated using a simple formula: A x B / C, where, 

• A = Investment in the residential house plus the amount deposited in the capital gain account scheme. The total amount of investment cannot exceed Rs 10 crores.
• B = Long-term Capital Gains
• C = Net consideration from the transfer of the original asset.

When Can the Exemption u/s 54F be Withdrawn?

• If you buy a residential house property other than the new house, within 2 years of the date of sale of the asset, then the income from such house is taxable under the head Income From House Property.

• If you construct another house (not the new house) within 3 years of selling the original asset, the earlier capital gain exemption becomes taxable under the head Income From House Property.

• If you do not use the deposited amount capital gain account scheme to purchase a house property within 2 years or construct a house property within 3 years from the date of transfer, the unused deposited amount will be treated as long-term capital gains.

• When you transfer the new house within 3 years from the date of purchase or construction, the tax exemption you claimed earlier will be withdrawn.

When Can the Exemption u/s 54F be Rejected?

The exemption may be rejected if the taxpayer is already having more than one residential house on the date of sale of the original asset, except the one bought within one year before the sale.