# Section 54F — LTCG on Sale of Any Capital Asset (Other than Residential House) Invested in House Property

## Eligibility

Eligible Assessee: Individual / HUF
Asset Transferred: Any capital asset OTHER than a residential house property (must be LTCG)

## Investment Conditions

Invest in One Residential House Property in India
Time Limit:
Purchase: within 1 year before or 2 years after date of transfer, OR
Construct: within 3 years from date of transfer

## Exemption Formula

$$\text{Exemption} = \frac{\text{Amount Invested}}{\text{Net Sale Consideration}} \times \text{LTCG}$$

Cap: Amount invested in excess of ₹ 10 crores shall be ignored.

## Additional Condition

The assessee must NOT own more than one residential house (other than the new house) at the time of transfer.

## Withdrawal of Exemption

If the new residential house is transferred within 3 years, the amount earlier exempted becomes taxable as LTCG in the year of such transfer.

## CGAS Requirement

If the investment is not made before the due date of filing ROI, the unutilized amount must be deposited in CGAS on or before filing ROI.

Worked example

### Example 1

Example: Ms. Priya sold gold for ₹ 80 lakhs (LTCG = ₹ 50 lakhs). She invested ₹ 60 lakhs in a new residential house within 1 year. She owns no other house. Exemption = (60 / 80) × 50 = ₹ 37.5 lakhs. Taxable LTCG = ₹ 50 − ₹ 37.5 = ₹ 12.5 lakhs.

### Example 2

Cap Example: If sale consideration is ₹ 15 crores and Ms. Priya invests ₹ 12 crores → amount considered for exemption is restricted to ₹ 10 crores.

⚠️ Common exam mistakes

Applying Section 54F where the asset transferred is a residential house (use Section 54 instead).
Ignoring the condition that the assessee should not own more than 1 other residential house at the time of transfer.
Applying the ₹ 50 lakh cap (that's for 54EC); 54F has a ₹ 10 crore cap.
Using the formula in 54 (LTCG → invest = exempt); 54F requires proportional formula using Net Sale Consideration.

Bare-Act text Section 54F · Income Tax Act, 1961 · click to expand

Section 54F provides exemption from LTCG arising from transfer of any long-term capital asset, other than a residential house property, if net sale consideration is invested in a residential house property in India, subject to specified conditions including the ₹ 10 crore ceiling.

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Exemption under Section 54F - Investment in Residential House

Worked example

⚠️ Common exam mistakes