Compute proportional LTCG tax exemptions under Section 54F when sale proceeds of unlisted shares, gold, land, or commercial property are reinvested in a residential house.
Gross sale price less transfer expenses.
Capped at ₹10,00,00,000 (₹10 Cr) under Budget 2023.
Proportional exemption: Reinvesting 80% of net proceeds exempts 80% of total LTCG.
Section 54F of the Income Tax Act, 1961 provides complete or proportional tax relief to Individual and HUF taxpayers who sell any Long Term Capital Asset (other than a residential house property—such as unlisted shares, gold, commercial land, or commercial shops) and reinvest the proceeds into a residential house.
• Purchase: Within 1 year before or 2 years after the date of asset transfer.
• Construction: Within 3 years from the date of asset transfer.
• CGAS Deposit: If not invested before ITR due date (July 31st / Oct 31st), deposit in Capital Gains Account Scheme (CGAS).
1. The taxpayer must not own more than one residential house on the date of transfer.
2. The taxpayer must not purchase another house within 1 year or construct another house within 3 years.
3. Maximum Section 54F exemption is statutorily capped at ₹10 Crores under Finance Act 2023.
| Feature | Section 54 | Section 54F |
|---|---|---|
| Original Asset Sold | Residential House Property Only | Any Long Term Asset OTHER than Residential House |
| Reinvestment Required | Reinvest only the Capital Gain amount | Reinvest entire Net Sale Consideration |
| Proportional Exemption | LTCG - Investment | LTCG × (Investment ÷ Net Consideration) |
| Statutory Upper Cap | ₹10 Crores | ₹10 Crores |
If the newly acquired house is sold within 3 years of purchase or construction, the capital gain exempted earlier under Section 54F is revoked and taxed as Long Term Capital Gain in the year of sale.
No. Under Section 54F, the new residential property must be located within India.
Proportional exemption is granted based on the exact ratio of the amount reinvested to the total net sale consideration: Exemption = Total LTCG × (Amount Reinvested ÷ Net Sale Consideration).